My Size, Inc. Annual Report 2018

Plain-text annual report

10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017Assets10K 1 f10k2018_mysizeinc.htm ANNUAL REPORTUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________ to _________Commission file number 00137370MY SIZE, INC.(Exact name of registrant as specified in charter)Delaware510394637(State or jurisdiction ofIncorporation or organization)I.R.S EmployerIdentification No.3 Arava St. P.O.B. 1026, Airport City, Israel7010000(Address of principal executive offices)(Zip code)+972 72 3331002(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act:None.Indicate by check mark whether the registrant is a wellknown seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 K or any amendment to this Form 10 K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer, a smaller reporting company, or an emerginggrowth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of theExchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Exchange Act) Yes ☐ No ☒The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2018, the last business day of theregistrant’s most recently completed second fiscal quarter, was approximately $22,261,408.Number of shares of common stock outstanding as of March 1, 2019 was 29,852,389.Documents Incorporated by Reference: None.Table of ContentsPart IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments29Item 2.Properties29Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures29Part IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data30Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A.Quantitative and Qualitative Disclosures about Market Risk35Item 8.Financial Statements and Supplementary DataF1Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure36Item 9A.Controls and Procedures36Item 9B.Other Information36Part IIIItem 10.Directors, Executive Officers and Corporate Governance37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters44Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services46Part IVItem 15.Exhibits, Financial Statement Schedules47Signatures49iTable of ContentsPART IIn this Annual Report on Form 10K, unless the context requires otherwise, the terms “we,” “our,” “us,” or “the Company” refer to MySize, Inc., a Delawarecorporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken as a whole.References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwiseindicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 10K for the year ended on December 31, 2018 are translated using therate of NIS 3.748 to $1.00.CAUTIONARY NOTE ON FORWARDLOOKING STATEMENTSThis Annual Report on Form 10K contains certain forwardlooking statements within the meaning of Section 27A of the Securities Act and Section 21E ofthe Exchange Act. Any statements in Annual Report on Form 10K about our expectations, beliefs, plans, objectives, assumptions or future events or performanceare not historical facts and are forwardlooking statements. These statements are often, but not always, made through the use of words or phrases such as“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumedfuture results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future managementand organizational structure are all forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve known and unknownrisks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels ofactivity, performance or achievements expressed or implied by any forwardlooking statement.Any forwardlooking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on Form 10K. Someof the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forwardlookingstatements include but are not limited to:●our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or atall;●the new and unproven nature of the measurement technology markets;●our ability to achieve customer adoption of our products;●our dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;●our ability to enhance our brand and increase market awareness;●our ability to introduce new products and continually enhance our product offerings;●the success of our strategic relationships with third parties;●information technology system failures or breaches of our network security;●competition from competitors;●our reliance on key members of our management team;●current or future litigation; and●the impact of the political and security situation in Israel on our business.1Table of ContentsThe foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forwardlooking statements.You should read this Annual Report on Form 10K and the documents that we reference herein and have filed as exhibits to the Annual Report on Form 10K,completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the informationappearing in this Annual Report on Form 10K is accurate as of the date hereof. Because the risk factors referred to on page 2 of Annual Report on Form 10K, couldcause actual results or outcomes to differ materially from those expressed in any forwardlooking statements made by us or on our behalf, you should not placeundue reliance on any forwardlooking statements. Further, any forwardlooking statement speaks only as of the date on which it is made, and we undertake noobligation to update any forwardlooking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence ofunanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impactof each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforwardlooking statements. We qualify all of the information presented in this Annual Report on Form 10K, and particularly our forwardlooking statements, bythese cautionary statements.ITEM 1. BUSINESSOverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Our SolutionOur cloudbased software platform provides accurate sizing and measurement with broad applications including the online fashion/apparel industry,logistics and courier services and home DIY. This proprietary technology is driven by several patented algorithms which are able to calculate and recordmeasurements in a variety of novel ways. Although specific functionality varies by product, our core solutions address the need for highly accurate measurementsin a variety of consumer friendly, every day uses.The following are some select key features:●Integration Capability. We design our solutions to be flexible and configurable, allowing our clients to match their use of our algorithms and softwarewith their specific business processes and workflows. Our platform has been organically developed from a common code base, data structure and userinterface, providing a consistent user experience with powerful features that are easily adaptable to our clients’ needs;●Intuitive user experience. Our intuitive, easytouse interface is based on current technology multiple focus groups and automatically adapts to users’devices, including mobile platforms, thereby significantly increasing accessibility of our solutions;●Big Data Generation. While we supply to the user the information he/she requires, we gather certain vital information such as body measurement andpackage volume which can be used anonymously to help the retailer acquire predictive size information on stocking, operations and consumers thatmay be in between sizes. All this information is being gathered and stored on our servers where it can be used by retailers;2Table of Contents●White Label Solution. Our solutions can be transformed into white label applications at an extra cost to any customer that wants to utilize or embedour technology within their systems; and●NonInvasive. Owing to our unique, noninvasive technology, the smartphone camera is not used for measurement; all the measurements are recordedby moving the smartphone over the consumer’s body or package, thus ensuring greater privacy.Our Growth StrategyWe intend to drive revenue primarily through penetration of the U.S. market in the verticals we are targeting. We intend to pursue the following growthstrategies:●Sign Commercial Agreement with Major U.S. Retailer. We are in various stages of discussions with major U.S. retailers for the deployment of ourmeasurement technology with a view to entering into a commercial agreement. We believe that if we are successful in entering into a commercialagreement with a major U.S. retailer this will serve as an important thirdparty validation of our technology and help accelerate commercial adoption ofour solutions.●Pursue a TwoPronged Commercialization Strategy. We are seeking to accelerate adoption of our solutions both through direct partnerships with ecommerce websites as well as through third party platform websites. While we seek to directly enter into partnerships with companies maintaining ecommerce websites in the apparel, courier and DIY markets, we are also seeking to deploy our solutions on third party platforms. In February 2019,MySizeID became available for online retailers utilizing the Shopify platform and BoxSizeID became available on the Honeywell Marketplace.●Ongoing Investment in our Technology Platform. We intend to continue to invest in building new software capabilities and extending our platform tobring the power of accurate measurement to a broader range of applications.●Grow our database. As the usage of our measurement apps increases, our database of information including user behavior and body measurementsgenerates valuable statistics. Such data can be used in the big data market for targeted advertising and for blind consumer data mining.The MarketsThe mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were once primarilybrickandmortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project – have now shifted to digital, as consumersprefer the convenience of shopping anywhere, anytime.Ecommerce’s meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices.According to SaleCycle, in the U.S. ecommerce sales for 2017 were $453.5 billion, an increase of 16% from the year prior. While many sectors have found ways toincrease revenue through ecommerce, ecommerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,low consumer conversion, and associated restocking and shipping costs.Fashion/ApparelThe fashion market is one of the fastest growing sectors of online retail – what was already an approximately $332 billion market in 2016 is projected toincrease to over $633 billion in 2021 according to statista. However, conveniences of online shopping, including simple search filters, the ability to purchase apparelwithout trying it on, and free returns, have led consumers to a more freewheeling buying style that is costing retailers major dollars.3Table of ContentsOne of the biggest causes for returns are sizing issues, due in part to a truly universal sizing system that leaves consumers guessing what size they need orordering multiple sizes and returning the ones that do not fit, all the retailer’s expense. Research shows that 30% of all online purchases are returned.To address this issue, we have developed an innovative mobile technology for retailers, known as MySizeID. MySizeID enables shoppers to generatehighly accurate measurements of their body to find proper fitting clothes and accessories, all through the use of our App on their mobile phone. MySizeID syncs theuser’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application, and only presents items for purchase that match theirmeasurements to ensure a correct fit. MySizeID is available for license by retailers and download by consumers on both iOS and Android operating systems.Shipping/ParcelAccording to Pitney Bowes, parcel revenue in 2017 in 13 major countries around the world was $279 billion or 75 billion parcels with the number of parcelsprojected to grow to 100 billion by 2020. In the shipping/parcel industry, the dimensions of a package are critical. It is not merely the measurement of a package orbox – but rather the amount of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.To address this issue for shipping companies, we have developed an innovative mobile technology known as BoxSizeID. BoxSizeID enables customers toquickly and easily measure the size and volume of a parcel to accurately calculate shipping fees. It also offers shipping companies a variety of precise logistical datafor more efficiently managing their supply chain, providing them with an accurate way to compare the physical package with what is in the shipping manifest.BoxSizeID solution is available for license on both iOS and Android operating systems.DIYSimilar to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit andmeasurements. In an industry where precise measurement for projects is an absolute necessity, ecommerce has not grown as quickly as in other industries which webelieve is due to lack of consumer confidence in measurements at home and buying the correct item online.To address this issue for retailers, we have developed an innovative mobile technology known as SizeUp. SizeUp is a digital tape measure that allows usersto measure length, width and height of a surface by moving their smartphone from point to point of an object or space. SizeUp is a valueadd for DIY and homeimprovement retailers whose customers struggle to find the appropriately sized items (like blinds or curtains) for their homes or projects due to inaccuratemeasurements. SizeUp also is designed to replace rulers, tape measures and other measuring tools used for DIY projects. SizeUp is available for consumer downloadon both iOS and Android operating systems, with more than 1,000,000 consumer downloads to date.MySizeIDWe have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own body in order tosize clothing in the best way possible without the need to try the clothes on before purchasing. The benefit of our application is that it simplifies the process ofpurchasing clothes online and significantly reduces the rate of returns of illfitting clothing. The application is the result of a research and development effort that combines:●anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination ofcorrelations between body parts;●body measurement algorithm research – an algorithm created by us to measure body parts; and●retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size.”4Table of ContentsMySizeID allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online retailers, toensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the use of existing sensors in smart phones which enable,through a specific purpose application, the measurement of the body of any consumer by moving the smartphone phone along his or her body. The MySizeIDapplication does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the applicationrecords their measurements. The measurements can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websiteswithout worrying about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s measurements andother parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar store to help serve the customer moreefficiently and to provide a better shopping experience.Figure 1: Screenshot of MySizeID on smartphone and ecommerce websiteAs part of the integration process, we offer to the retailer three main components:●Mobile App. MySizeID comes in the form of a native app or as white label app. Our native app can be used “as is” integrated into the retailer’s ecommerce website. Alternatively, it can be white labeled according to the retailer’s needs in a manner that showcases the retailer brand (colors, logoetc.). The retailer can also receive the MySizeID standard development kit, or SDK, and integrate it into its own existing application so the retailer’sconsumers will not have to have two separate apps when shopping online.5Table of Contents●Widget. When a consumer enters into the retailer’s website and looks for a specific item, he or she can click on the MySizeID widget which will informthe consumer of his or her recommended size, based on his or her actual measurements, as measured using the app and the item he or is looking at.Figure 2: Screenshot of MySizeID widget on Modelista website●BackOffice The backoffice system is the place where the retailer inputs all the information regarding its size charts that correlates to every product inits ecommerce site, and where the retailer can access the information on its users.Figure 3: Screenshot of BackOffice System6Table of ContentsAs we are licensing the technology, we are currently offering MySizeID to retailers on a pay per use basis. In a pay per use business model, every time theconsumer obtains a recommended size, we charge the retailer for the usage.In addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our application on theplatform’s app store and will be able to easily install it in their store. In February 2019, MySizeID became available for online retailers utilizing the Shopify platform.Fashion and apparel retailers using Shopify can now deploy the MySizeID turnkey solution through the simple integration of the MySizeID widget on their site. In November 2016, we introduced a new product called TrueSize. TrueSize is a customizable, whitelabel, mobile application that empowers retailers toimprove the online shopping experience of their customers by matching their true measurements with the retailer’s offerings. Due to the introduction of MySizeID, inJune 2019, we plan on ending support for this product.BoxSizeIDBoxSizeID is an intuitive parcel measurement application that can provide realtime logistic data on package volumes and transportation, resulting inimproved operational efficiency and reduced operating expenses. In addition, BoxSizeID allows customers to easily measure the size of their parcel with theirsmartphone, calculate shipping costs and arrange for a convenient pickup time for the package. During 2018, we released BoxSizeID for Android which has agreater market opportunity since, based on our experience, most courier companies are using Android based handheld devices. As a result, BoxSizeID is availableboth on iOS and Android.Figure 4: Screenshot of BoxSizeIDWe are currently developing Two Shots, an algorithm that is intended to make package measurement even faster through two measurements, to measurethe height, width and depth, of a package rather than three separate measurements.7Table of ContentsAgreement with Katz Delivery Services, LTDOn November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier services in Israel.Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize technology with the Katz ERP to accuratelymonitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use our technology to help with planning its distribution routes,thus reducing operational costs by adjusting the distribution vehicles to the volume of the shipments.KatzID was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users to scan the barcodeof a package and measure the package dimensions using MySize’s SizeIT technology (described below) and then subsequently upload the information directly toKatz’s back office. The technology is being used to control package volumes and accurately charge Katz’ customers accordingly.In September 2018, we entered into a new agreement with Katz pursuant to which we are licensing to Katz on a softwareasaservice basis KatzID for amonthly fee based on the number of packages measured. We have completed integration of KatzID into the Katz ERP system. To date, there have been no materialrevenues from this agreement.SizeUpWe are working on additional consumer applications. One of these applications is in the category of DIY. This application is a smart tape measure for thebusiness to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements with an accuracy of plus orminus 2 centimeters. Through the use of this application users will be able to visualize how an object or a piece of furniture will fit in an existing room in their homeor office. As many people have difficulty with spatial recognition, we hope this will help alleviate the problem. During 2018 we expanded availability of SizeUp tomore than 45 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object detection, and titlesuggestions. As of March 1, 2019, there have been over 1,000,000 downloads of the SizeUp app.Currently the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to pay a onetime fee of $1.99 tocontinue using the application. To date, revenues from downloads have been nominal.SizeITWe have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability to instantly andaccurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID, SizeUp, and BoxSizeID applications, can beembedded into any company’s existing or white label mobile app in a short period of time, offering an efficient solution to the escalating costs associated withproduct sizing issues and returns. SizeIT enables users to measure objects by moving their mobile device from one side of an object to another side of the object.Our algorithm utilizes a mobile device’s motion sensors to calculate the travelled distance.Research and DevelopmentOur research and development team is responsible for the design, development, and testing of all aspects of our measurement platform technology. Weinvest in these efforts to continuously improve, innovate, and add new features to our solutions.We incurred research and development expenses of $1,105,000 in 2018 and $845,000 in 2017 and $727,000 in 2016, relating to the development of itsapplications and technologies. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurementtechnology to a broader range of applications.8Table of ContentsSales and MarketingWe recently launched a commercialization strategy that directs our sales efforts toward both sales to ecommerce players in specific vertical markets suchas fashion/apparel and shipping/delivery as well as to ecommerce third party platform providers. As of March 1, 2019, we have two fulltime sales professionals inthe United States who lead our efforts to penetrate the U.S. marketplace through driving market awareness, generating customer leads, building out a sales pipeline,and developing customer relationships.We believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free trials of one ormore of our products in order to successfully convert those accounts to paid subscriptions.Proprietary RightsWe rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as contractualprotections, to protect our proprietary technology.As of December 31, 2018, we owned four issued patents one in each of Russia and Japan and two in the U.S., which expire between January 20, 2033 andMay 11, 2035, and we have eighteen additional patent applications in process. As of such date, we do not have any registered trademarks.We cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since the validity,enforceability and type of protection of proprietary rights in softwarerelated industries are uncertain and still evolving.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use informationthat we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our softwareproducts exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to asgreat an extent as do the laws of the United States, and effective copyright, trademark, trade secret and patent protection may not be available in those jurisdictions.Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.Further, in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in thesoftware and Internetrelated industries. We can become subject to intellectual property infringement claims as the number of our competitors grows and ourproducts and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’sattention from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantialaward of damages and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We maybe unable to develop noninfringing technology or obtain a license on commercially reasonable terms, if at all.Government RegulationWe are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations mayinvolve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject are still evolving and being testedin courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often areuncertain, particularly in the new and rapidly evolving industry in which we operate. Because global laws and regulations have continued to develop and evolverapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.9Table of ContentsIn particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal data. Many U.S. stateshave passed laws requiring notification to data subjects when there is a security breach of personally identifiable data. There are also a number of legislativeproposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection lawsin Europe and other jurisdictions outside the United States can be more restrictive than those within the United States, and the interpretation and application ofthese laws are still uncertain and in flux.For example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for entities thatprocess personal data about individuals, including obligations to cooperate with European data protection authorities, implement security measures and keeprecords of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including areview of our technology and systems currently in use against the requirements of GDPR. We have taken various steps to prepare for complying with GDPRhowever there can be no assurance that these steps are sufficient to assure compliance. Further, additional EU laws and regulations (and member states’implementations thereof) further govern the protection of individuals and of electronic communications. If our efforts to comply with GDPR or other applicable lawsand regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results of operations, and our ability touse personal data of individuals could be significantly impaired.CompetitionWe operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the programinglanguages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements. Our competitors includeTrue Fit, Virtusize, EasyMeasure, AR MeasureKit, and Smart Measure.The principal competitive factors in our market include the following:●product and platform features, architecture, reliability, privacy and security, performance, effectiveness, and supported environments;●product extensibility and ability to integrate with other technology infrastructures;●digital operations expertise;●ease of use of products and platform capabilities;●total cost of ownership;●adherence to industry standards and certifications;●strength of sales and marketing efforts;●brand awareness and reputation; and●focus on customer success.We believe we generally compete favorably with our competitors on the basis of these factors. We expect competition to increase as other established andemerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced. We expect this to be particularlytrue as we are a smartphonebased offering that does not need to utilize the smartphone’s camera, and our competitors may also seek to repurpose their existingofferings to provide similar solutions. Many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, largersales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios.10Table of ContentsEmployeesAs of March 1, 2019, we had a total of 29 employees, of which 21 were fulltime employees, including 7 in sales and marketing, 17 in technology anddevelopment and 5 in administration and finance. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relationship with our employees to be good. Our future success depends on our continuing ability to attract and retain highly qualifiedengineers, sales and marketing, account management, and senior management personnel.Company InformationOur principal executive offices are located at 3 Arava St., P.O. Box 1026, Airport City, Israel 7010000, and our telephone number is +97236009030. Ourwebsite address is www.mysizeid.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it inany way a part of, this Annual Report on Form 10K.We use our website (www.mysizeid.com) as a channel of distribution of Company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls andwebcasts. The contents of our website are not, however, a part of this Annual Report on Form 10K.Corporate HistoryWe were incorporated in the State of Delaware on September 20, 1999 under the name Topspin Medical, Inc. In December 2013, we changed our name toKnowledgetree Ventures Inc. Subsequently, in February 2014, we changed our name to MySize, Inc.From inception through 2012, we were engaged in research and development of a medical magnetic resonance imaging, or MRI, technology forinterventional cardiology and in the development of MRI technology for use in the diagnosis and treatment of prostate cancer. In January 2012, we acquiredMetamorefix Ltd., or Metamorefix. Metamorefix was incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation oftissues, particularly skin tissues. By the end of 2012, we ceased operations and in January 2013, we sold our entire ownership interest in Metamorefix.In September 2013, Ronen Luzon, our Chief Executive Officer, acquired control of the Company from Asher Shmuelevitch according to which Mr. Luzonpurchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued and outstanding capital stock of theCompany at such time, thus becoming a controlling shareholder of the Company. In connection with the acquisition, Mr. Luzon reached a settlement with our thencreditors pursuant to which the main creditor, Mr. Shmuelevitch, was paid a total sum of approximately $140,000 in consideration for a full and final waiver of any andall his claims that he may have relating to any monetary indebtedness of the Company to the creditors.In February 2014, My Size Israel 2014 Ltd., our wholly owned subsidiary, entered into a Purchase Agreement, or the Purchase Agreement, with ShoshanaZigdon, or the Seller, who at the time was a beneficial owner of more than 20% of our outstanding shares, with respect to the acquisition by us of certain rightsrelated to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller(PCT/IL2013/050056), or the Assets. In consideration for the sale of the Assets, we agreed to pay to Seller, 18% of our operating profit, directly or indirectlyconnected with the Assets together with valueadded tax in accordance with the law for a period of seven years from the end of the development period of theaforementioned venture. In addition to the foregoing, the Purchase Agreement provides that all developments, improvements, knowledge and knowhow developedand/or accumulated by us after the execution of the Purchase Agreement will be owned by us. Further, the Seller agreed not to compete, directly or indirectly, with usin any matter relating to the Assets for a period of seven years from the end of the development period of the venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million), each a “Repurchase Event”. If a Repurchase Event occurs, the Seller shall have a 90 day right, subject to delivery of writtennotice to us of Seller’s intention to exercise such right, to repurchase the Assets from us. The repurchase price will be based upon a market price to be determined byone or more external appraisers. Unless the Seller provides written notice of retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated torepurchase the Assets within 60 days from the date of receipt of the appraisal. Seller shall have the right to retract its intention to repurchase the Assets, providedSeller gives written notice to us within 30 days of receiving the appraisal and subject to the Seller refunding to us the the expenses borne by us in respect of theappraisal. To date, no material income has been derived from the Assets.In September 2005, we commenced trading on the Tel Aviv Stock Exchange, or TASE. Between 2007 and 2012 we reported as a public company with theSEC. In August 2012, we suspended our reporting obligations. In mid2015 we resumed reporting as a public company. On July 25, 2016, our common stock beganpublicly trading on the Nasdaq Capital Market under the symbol “MYSZ”.11Table of ContentsITEM 1A. RISK FACTORSAn investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information inthis Annual Report on Form 10K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the followingrisks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterialalso may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial conditionand results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose allor part of your investment.Risks Related to Our Financial Position and Capital RequirementsWe have historically incurred significant losses and there can be no assurance when, or if, we will achieve or maintain profitability.We realized a net loss of $6.0 million and $5.4 million for the years ended December 31, 2018 and 2017 and had an accumulated deficit of $23.0 million as atDecember 31, 2018. Because of the numerous risks and uncertainties associated with the development of our products and business, we are unable to predict theextent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse effect on our cash resources,shareholders’ equity and working capital. Our failure to become and remain profitable could depress the value of our stock and impair our ability to raise capital,expand our business, maintain our development efforts, or continue our operations. A decline in our value could also cause you to lose all or part of your investmentin us.Our limited operating history makes it difficult to evaluate our business and prospects.We have only been developing our measurement technology since 2014. Since then, our operating history has been primarily limited to research anddevelopment, pilot studies, raising capital, and limited sales and marketing efforts. Therefore, it may be difficult to evaluate our business and prospects. We have notyet demonstrated an ability to commercialize our products. Consequently, any predictions about our future performance may not be accurate, and you may not beable to fully assess our ability to complete development and/or commercialize our products, and any future products.12Table of ContentsWe will need to raise additional capital to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive andmay cause the market price of our common stock to decline.Based on our projected cash flows and the cash balances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fundour obligations for a period which is longer than 12 months from the date of this Annual Report on Form 10K. However, in order to meet our business objectives inthe future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish thefollowing:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition.13Table of ContentsRisks Related to Our Company and Our BusinessWe may never successfully develop any products or generate revenues.We only recently transitioned into the commercialization phase of our products and have only generated minimal revenues to date. We may be unable tosuccessfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and anyrevenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.The market for our measurement technology is new and unproven, may experience limited growth and is highly dependent on U.S. retailers and onlinethird party resellers adopting our flagship product, MySizeID.The market for our measurement technology is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that ourfuture success will depend in large part on market adoption of our flagship product, MySizeID, by U.S. retailers and online third party resellers. In order to grow ourbusiness, we intend to focus on educating retailers and resellers and other potential customers about the benefits of our measurement technology, expanding thefunctionality of our products and bringing new products to market to increase market acceptance and use of our technology. Our ability to develop and expand themarket that our products address depends upon a number of factors, including the cost savings, performance and perceived value associated with such products.The market for our products could fail to develop or there could be a reduction in interest or demand for our products as a result of a lack of consumer acceptance,technological challenges, competing products and services, weakening economic conditions and other causes. We may never successfully commercialize ourproducts and if our products fail to achieve market acceptance, this would have a material adverse effect on our business, results of operations and financialcondition. Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to grow our business and achieve broadermarket acceptance of our products.Our ability to achieve customer adoption, especially among U.S. retailers will depend, in part, on our ability to effectively organize, focus and train our salesand marketing personnel. We have limited experience selling to U.S. retailers and only recently established a U.S. sales force. We believe that there is significantcompetition for experienced sales professionals with the skills and industry knowledge that we require. Our ability to achieve significant revenue growth in thefuture will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience sellingto U.S. retailers. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achievefull productivity, particularly for sales efforts targeted at U.S. retailers and new markets. Because we only recently started sales efforts, we cannot predict whether, orto what extent, our sales efforts will be successful.We expect our sales cycle to be long and unpredictable and require considerable time and expense before executing a customer agreement, which maymake it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.As we seek adoption of our products by U.S. retailers, we expect to incur higher costs and long sales cycles. In this market segment, the decision to adoptour products may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. Inaddition, while U.S. retailers may be willing to deploy our products on a limited basis, before they will commit to deploying our products at scale, they often requireextensive education about our products and significant customer support time, engage in protracted pricing negotiations and seek to secure readily availabledevelopment resources. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these customers. As part of oursales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenuefrom such agreement. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in themarketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable torecover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes and if revenue expected to be generated from aprospective customer is not realized in the time period expected or not realized at all, our ability to grow our business, and our operating results and financialcondition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on ouroperating results and could cause our stock price to decline.14Table of ContentsWe are substantially dependent on assets we purchased from a related party, and if we lose the rights to such assets or the assets are repurchased forany reason, our ability to develop existing and new applications based upon these assets would be harmed, and our business, results of operations andfinancial condition would be materially and adversely affected.In February 2014, we entered into a Purchase Agreement with a related party, Shoshana Zigdon, pursuant to which we acquired certain rights related to thecollection of data for measurement purposes. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement.Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose therights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for thesale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with valueadded tax inaccordance with the law for a period of seven years from the end of the development period of the aforementioned venture.The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that theSeller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy; or (b) ifon the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less thanNIS 3.6 million (approximately $1 million). To date, we have only generated limited revenue. If Ms. Zigdon repurchases the Assets, our ability to develop andcommercialize our products would be significantly harmed and we may cease operations.If we are not able to enhance our brand and increase market awareness of our company and products, then our business, results of operations andfinancial condition may be adversely affected.We believe that enhancing the “MySize” brand identity and increasing market awareness of our company and products, particularly among U.S. retailers, iscritical to achieving widespread acceptance of our products. Our ability to successfully develop new retailers may be adversely affected by a lack of awareness oracceptance of our brand. To the extent that we are unable to foster name recognition and affinity for our brand, our growth may be significantly delayed or impaired.The successful promotion of our brand will depend largely on our continued marketing efforts, market adoption of our products, and our ability to successfullydifferentiate our products from competing products and services. Our brand promotion may not be successful or result in revenue generation. Any incident thaterodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If consumers perceive or experience a reduction inquality, or in any way believe we fail to deliver a consistently positive experience, our brand value could suffer and our business may be adversely affected.In particular, adverse weather conditions can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes forprolonged periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December. Adverse weatherconditions during our most favorable months or periods may exacerbate the effect of adverse weather on consumer traffic and may cause fluctuations in ouroperating results from quartertoquarter within a fiscal year.If we do not develop enhancements to our products and introduce new products that achieve market acceptance, our business, results of operationsand financial condition could be adversely affected.Our ability to attract new customers depends in part on our ability to enhance and improve our existing products, increase adoption and usage of ourproducts and introduce new products. The success of any enhancements or new products depends on several factors, including timely completion, adequatequality testing, actual performance quality, and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely orcosteffective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products or may not achieve the broad marketacceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our products depends, in part, on the development of newuse cases for our products and may be outside of our control. If we are unable to successfully enhance our existing products to meet evolving customerrequirements, increase adoption and usage of our products, develop new products, then our business, results of operations and financial condition would beadversely affected.15Table of ContentsThe mobile technology industry is subject to rapid technological change and, to compete, we must continually enhance our mobile Apps and customdevelopment services.We must continue to enhance and improve the performance, functionality and reliability of our products. The mobile technology industry is characterizedby rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies andthe emergence of new industry standards and practices that could render our products obsolete. Our success will depend, in part, on our ability to both internallydevelop and enhance our existing products, develop new products that address the increasingly sophisticated and varied needs of our customers, and respond totechnological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our technology involvessignificant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customerrequirements or emerging industry standards. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, wemay not be able to increase our revenue and expand our business.Changes in economic conditions could materially affect our business, financial condition and results of operations.Because our primary target customers include U.S. retailers, we, together with the rest of the fashion/apparel industry, will depend upon consumerdiscretionary spending. Increases in unemployment rates, reductions in home values, increases in home foreclosures, investment losses, personal bankruptcies andreductions in access to credit and reduced consumer confidence, may impact consumers’ ability and willingness to spend discretionary dollars. In addition, volatileeconomic conditions may repress consumer confidence and discretionary spending. Any of the foregoing may have a material adverse effect on our business,financial condition and results of operations.Our growth depends, in part, on the success of our strategic relationships with third parties.To grow our business, we anticipate that we will continue to depend on relationships with third parties, such as Katz Corporation. Identifying partners, andnegotiating and documenting relationships with them, requires significant time and resources. If we are unsuccessful in establishing or maintaining our relationshipswith third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our results of operations may suffer. Even if we aresuccessful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.We rely upon third parties to provide distribution for our applications, and disruption in these services could harm our business.We currently utilize, and plan on continuing to utilize over the current fiscal year, thirdparty networking providers and distribution through companiesincluding, but not limited to, Apple and Google as well as Shopify and Honeywell to distribute our technologies. If disruptions or capacity constraints occur, we mayhave no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations and financial earnings.We rely on thirdparty hosting and cloud computing providers to operate certain aspects of our business. Any failure, disruption or significantinterruption in our network or hosting and cloud services could adversely impact our operations and harm our business.Our technology infrastructure is critical to the performance of our products and customer satisfaction. Our products run on a complex distributed system,or what is commonly known as cloud computing. We own, operate and maintain elements of this system, but significant elements of this system are operated bythirdparties that we do not control and which would require significant time to replace. We expect this dependence on thirdparties to continue. In particular, asignificant portion, if not almost all data storage, data processing and other computing services and systems is hosted by cloud computing providers. Anydisruptions, outages and other performance problems relating to such services, including infrastructure changes, human or software errors and capacity constraints,could adversely impact our business, financial condition or results of operations.16Table of ContentsInformation technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss,telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Anydamage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on ourbusiness and subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants to conduct auditingand testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operationalprocedures to prevent such damage, breaches or other disruptive problems, there can be no assurance that these security measures will be successful.Real or perceived errors, failures, or bugs in our products could adversely affect our operating results and growth prospects.We update our products on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our products until after theyare deployed to a customer. We have discovered and expect we will continue to discover errors, failures and bugs in our products and anticipate that certain of theseerrors, failures and bugs will only be discovered and remediated after deployment. Real or perceived errors, failures or bugs in our platform could result in negativepublicity, government inquiries, loss of or delay in market acceptance of our products, loss of competitive position, or claims by customers for losses sustained bythem. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct theproblem.We could be harmed by improper disclosure or loss of sensitive or confidential company, employee, or customer data, including personal data.In connection with the operation of our business, we store, process and transmit data, including personal and payment information, about our employeesand customers, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive or confidential data may occur through avariety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized access to or through ourinformation systems, whether by our employees or third parties, including a cyberattack by computer programmers, hackers, members of organized crime and/orstatesponsored organizations, who may develop and deploy viruses, worms or other malicious software programs. Such disclosure, loss or breach could harm ourreputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal data and confidential information,resulting in increased costs or loss of revenues. It is possible that security controls over sensitive or confidential data and other practices we and our thirdpartyvendors follow may not prevent the improper access to, disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks mayincrease as we introduce new products and offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict amongthe various jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personalinformation or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment toour reputation in the marketplace.17Table of ContentsA material breach in security relating to our information systems and regulation related to such breaches could adversely affect us.Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, andthe increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked toterrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information aboutanother company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and includemalicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in criticalsystems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person whocircumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant coststo protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent securitybreaches, or wellpublicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.Our products and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, dataprotection and information security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive andconfidential information. Any failure of our products to comply with or enable our customers to comply with applicable laws and regulations would harm ourbusiness, results of operations and financial condition.We and our customers that use our products may be subject to privacy and data protectionrelated laws and regulations that impose obligations inconnection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreigngovernments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiableinformation of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws toimpose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and useof personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often morerestrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security ofpersonally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in somejurisdictions, IP addresses and other online identifiers. For example, in April 2016 the EU adopted the General Data Protection Regulation, or GDPR, which took fulleffect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal dataon behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. There are also additional EU laws and regulations(and member states implementations thereof) which govern the protection of consumers and of electronic communications. If our efforts to comply with GDPR orother applicable EU laws and regulations are not successful, we may be subject to penalties and fines that would adversely impact our business and results ofoperations, and our ability to conduct business in the EU could be significantly impaired.Additionally, although we endeavor to have our products comply with applicable laws and regulations, these and other obligations may be modified, theymay be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements,contractual commitments or our internal practices. We also may be bound by contractual obligations relating to our collection, use and disclosure of personal,financial and other data or may find it necessary or desirable to join industry or other selfregulatory bodies or other privacy or data protectionrelatedorganizations that require compliance with their rules pertaining to privacy and data protection.We expect that there will continue to be new proposed laws, rules of selfregulatory bodies, regulations and industry standards concerning privacy, dataprotection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws,rules, regulations and standards may have on our business. Moreover, existing U.S. federal and various state and foreign privacy and data protectionrelated lawsand regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new lawsand regulations regarding privacy and data protectionrelated matters. Because global laws, regulations and industry standards concerning privacy and datasecurity have continued to develop and evolve rapidly, it is possible that we or our products or platform may not be, or may not have been, compliant with eachsuch applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact our business and practices,require us to expend significant resources to adapt to these changes, or to stop offering our products in certain countries. These developments could adverselyaffect our business, results of operations and financial condition.18Table of ContentsWe may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect ourbusiness.Our ability to implement our business plan successfully depends in part on our ability to build brand recognition using our trademarks, service marks andother proprietary intellectual property, including our names and logos. We currently have no registered trademarks. While we plan to register a number of ourtrademarks; however, no assurance can be given that our trademark applications will be approved. We have been issued four patents, one of each in of Russia, andJapan and two in the U.S., and have several patent applications in process. No assurance can be given that our patent applications which are in process will beapproved. If our patent applications are not approved, our ability to expand or develop our business may be negatively affected.Third parties may also oppose our trademark or patent applications, or otherwise challenge our use of the trademarks or patents. In the event that ourtrademarks or patents are successfully challenged, we could be forced to rebrand our goods and services or redesign our technology, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands and products.If our efforts to register, maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on ourintellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands fromachieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’ intellectual property rights. If third parties claimthat we infringe upon their intellectual property rights, our operating profits could be adversely affected. Any claims of intellectual property infringement, eventhose without merit, could be expensive and time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resourcesor require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against uscould result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any ofwhich could have a negative impact on our operating profits and harm our future prospects.We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base andgenerating revenue.We face significant competition in every aspect of our business. Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, and SmartMeasure. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and otherresources than us and have been developing their products and services longer than we have been developing ours.In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages potential customers from purchasing our products. Potentialcustomers may also prefer to purchase from their existing solution providers rather than a new solution provider regardless of product performance or features.These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditionsin our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.New startup companies that innovate and large competitors that are making significant investments in research and development may invent similar or superiorproducts and technologies that compete with our products. In addition, some of our competitors may enter into new alliances with each other or may establish orstrengthen cooperative relationships. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of anyfuture market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability tocompete. Furthermore, organizations may be more willing to incrementally add solutions to their existing infrastructure from competitors than to replace their existinginfrastructure with our products. Any failure to meet and address these factors could harm our business, results of operations and financial condition.19Table of ContentsOur business operations and future development could be significantly disrupted if we lose key members of our management team.The success of our business continues to depend to a significant degree upon the continued contributions of our senior officers and key employees, bothindividually and as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate Ronen Luzon, our ChiefExecutive Officer, and certain of our other senior executive officers. The loss of the services of our Chief Executive Officer, senior officers or other key employeescould have a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the services of any of theseindividuals in the foreseeable future; however, we currently have no effective replacement for any of these individuals due to their experience, reputation in theindustry and special role in our operations. We also do not maintain any key man life insurance policies for any of our employees.If we are able to expand our operations, we may be unable to successfully manage our future growth.Our growth may strain our infrastructure and resources. Any such growth could place increased strain on our management, operational, financial and otherresources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, andother professionals. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with ourbusiness objectives could have a material adverse effect on our business, results of operations and financial condition.Our business operations are conducted in multiple languages and could be disrupted due to miscommunications or translation errors.The success of our business continues to depend on our marketing efforts in the United States, Europe and Israel, each of which is conducted in the locallanguage. Miscommunications or inaccurate foreign language translations could have a material adverse effect on our business operations and financial conditions.Additionally, contracts, communications and complex technical information must be accurately translated into foreign languages.We will continue to incur costs and be subject to various obligations as a result of being a public company, listed in the United States and in Israel.We will continue to incur significant legal, accounting and other expenses as a result of being a public company, listed in the United States and in Israel.Although we will incur costs each year associated with being a publiclytraded company, it is possible that our actual costs of being a publiclytraded company willvary from year to year and may be different than our estimates. In estimating these costs, we take into account expenses related to insurance, legal, accounting andcompliance activities.Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing ourgrowth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make,changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a U.S. publicly traded company.However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.20Table of ContentsAny future or current litigation could have a material adverse impact on our results of operations, financial condition and liquidity.From time to time we may be subject to litigation, including, among others, potential stockholder derivative actions and class actions. Risks associated withlegal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. Subject to certain exceptions,our Amended and Restated Certificate of Incorporation, or Certificate of Incorporation, and Amended and Restated Bylaws, or Bylaws, require us to indemnify andadvance expenses to our officers and directors involved in legal proceedings. To date we have obtained directors and officers’ liability, or D&O, insurance to coversome of the risk exposure for our directors and officers.Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expensesincluding attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to us. There can be no assurance that we will be able tocontinue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. Without D&Oinsurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to us could have amaterial adverse effect on our financial condition, results of operations and liquidity. Such lawsuits, and any related publicity, may result in substantial costs and,among other things, divert the attention of management and our employees. An unfavorable outcome in any claim or proceeding against us could have a materialadverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods. Further,any settlement announced by us may expose us to further claims against us by third parties seeking monetary or other damages which, even if unsuccessful, woulddivert management attention from the business and cause us to incur costs, possibly material, to defend such matters, which could have a material adverse impacton our financial position. See “Legal Proceedings” on page 19 for more information regarding our involvement in ongoing litigation matters.Federal, state and local or Israeli tax rules may adversely impact our results of operations and financial position.We are subject to federal, state and local taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our taxestimates are reasonable, if the Internal Revenue Service or other taxing authority disagrees with the positions we have taken on our tax returns, we could faceadditional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a materialimpact on our results of operations and financial position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, andincreases to federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in our effectivetax rate could have a material impact on our financial results.Tax reform may affect us and our stockholders.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act”, or the TCJA, that significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and restricts the use of net operating loss carryforwards arising after December 31, 2017, allows for the expensing of capital expenditures,and implements a modified a territorial tax system. We do not expect the tax reform to have a material impact to our net operating losses. The impact of this tax reformon holders of our securities is uncertain. This Annual Report on Form 10K does not discuss any such tax legislation or the manner in which it might affectpurchasers of our securities. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential taxconsequences of investing in our securities.21Table of ContentsRisks Related To Our Operations In IsraelOur headquarters and most of our operations are located in Israel, and therefore, political conditions in Israel may affect our operations and results.Our headquarters and most of our operations are located in central Israel and our key employees, officers and directors are residents of Israel. Accordingly,political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of tradewithin Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raisecapital. During the winter of 2008, winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political partyoperating in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group andpolitical party. Israel faces political tension with respect to its relationships with Turkey, Iran and certain Arab neighbor countries. In addition, recent conflictsinvolved missile strikes against civilian targets in various parts of Israel, and negatively affected business conditions in Israel. Recent political uprisings and socialunrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration of thepolitical relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict.Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. Forexample, any major escalation in hostilities in the region could result in a portion of our employees and service providers being called up to perform military duty foran extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing usto make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreementsinvolving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions insuch agreements. Any future deterioration in the political and security situation in Israel will negatively impact our business.Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Althoughthe Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that thisgovernment coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts orpolitical instability in the region would likely negatively affect business conditions and could harm our results of operations.Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with theState of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or theexpansion of our business. Israel’s economy may become unstable.From time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity prices, militaryconflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, importduties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates and regulations regarding the lending limits of Israeli banks tocompanies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previousdestabilizing factors could make it more difficult for us to operate its business and could adversely affect its business.Some of our employees are obligated to perform military reserve duty in Israel.Many Israeli citizens, including our employees are obligated to perform one month, and in some cases more, of annual military reserve duty until they reachthe age of 40 (or older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases interrorist activity, there have been periods of significant callups of military reservists. It is possible that there will be military reserve duty callups in the future. Ouroperations could be disrupted by such callups. Such disruption could materially adversely affect our business, results of operations and financial condition.It may be difficult to enforce a nonIsraeli judgment against the Company or its officers and directors.The operating subsidiary of ours is incorporated in Israel. All of our executive officers and directors are not residents of the United States, and asubstantial portion of our assets and the assets of our executive officers and directors are located outside the United States. Therefore, a judgment obtained againstus, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United Statesand may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S.securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action withrespect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not themost appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law isapplicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a timeconsuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the mattersdescribed above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect any damages awarded byeither a U.S. or foreign court.22Table of ContentsOur international operations could expose us to additional risks, including exchange rate fluctuations, legal regulations and political or economicinstability that could harm our business and operating results.Our international operations expose us to the following risks which may have a material adverse effect on our business and operating results:●devaluations and fluctuations in currency exchange rates including fluctuations between the U.S. dollar and the NIS;●costs of compliance with local laws, including labor laws and intellectual property laws;●compliance with domestic and foreign government policies, including compliance with Israeli securities laws and TASE;●changes in trade regulations and procedures affecting approval, production, pricing, marketing, reimbursement for and access to, our products;●compliance with applicable foreign anticorruption laws, antitrust/competition laws, antiBoycott Israel law and antimoney laundering laws; and●economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, internationalhostilities, acts of terrorism and governmental reactions, inflation, and military and political alliances.Risks Related To Our Common StockA more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.Although our common stock is listed on the Nasdaq Capital Market, it has only been traded on the Nasdaq Capital Market since July 25, 2016. There hasbeen relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained.Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes tosell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop, we may be limited in our ability to raise capital byselling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is athin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a largefloat, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stockmay be more volatile and it would be harder for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant priceand volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:●our quarterly or annual operating results;23Table of Contents●changes in our earnings estimates;●investment recommendations by securities analysts following our business or our industry;●additions or departures of key personnel;●changes in the business, earnings estimates or market perceptions of our competitors;●our failure to achieve operating results consistent with securities analysts’ projections;●changes in industry, general market or economic conditions; and●announcements of legislative or regulatory changes.The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securitiesof many companies. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate basedupon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiringstockholder approval.As of March 1, 2019, members of our management team beneficially own approximately 7.7% of our outstanding common stock. In addition, ShoshanaZigdon beneficially owns approximately 11.7% of our outstanding common stock. As such, management and Ms. Zigdon own approximately, in the aggregate,19.4% of our voting power. As a result, management and Ms. Zigdon may have the ability to control substantially all matters submitted to our stockholders forapproval including:●election of our board of directors;●removal of any of our directors;●amendment of our Certificate of Incorporation or Bylaws; and●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.In addition, management’s and the stockholder’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investorswill own a minority percentage of our common stock and will have minority voting rights.Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of ourcommon stock.A substantial portion of our total outstanding shares of common stock may be sold into the market at any time. A substantial portion of these shares areheld by two stockholders, one of which is Ronen Luzon who is also Chief Executive Officer and director. Although we believe that Mr. Luzon has no currentintention to sell a significant number of shares of our stock, we cannot provide any such assurance. In addition, we cannot provide assurance that the other largestockholder, Ms. Zigdon, has no current intention to sell a significant number of shares of our stock. If any of the two stockholders were to decide to sell largeamounts of stock over a short period of time (presuming such sales were permitted) such sales could cause the market price of our common stock to dropsignificantly, even if our business is doing well. Further, the market price of our common stock could decline as a result of the perception that such sales could occur.These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that wedeem appropriate.24Table of ContentsOur securities are traded on more than one market which may result in price variations.Our securities have been trading on the Nasdaq Capital Market since July 2016 and on TASE since September 2005. Trading in our securities on suchexchanges occurs in different currencies (U.S. dollars on the Nasdaq Capital Market and NIS on the TASE), and at different times (due to different time zones,trading days and public holidays in the United States and Israel). The trading prices of our securities on the two exchanges may differ due to the foregoing andother factors. Any decrease in the price of our shares on the TASE could cause a decrease in the trading price of our shares on the Nasdaq Capital Market and viceversa.We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, ourcommon stock may be less attractive to investors.We are a smaller reporting company, (i.e. a company with “public float” held by nonaffiliates with a market value of less than $250 million) and we areeligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduceddisclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If someinvestors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may bemore volatile.We do not expect to pay any cash dividends in the foreseeable future.We have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant. Investors should not purchase our common stock expecting to receive cash dividends. Because we do notpay dividends, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failureto pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, because we do not paydividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which wouldresult in dilution of shareholders’ interests in the company and could depress our stock price.Our Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, of which 29,852,389 are currently outstanding as of March 1,2019, and our board of directors is authorized to issue additional shares of our common stock. Although our board of directors intends to utilize its reasonablebusiness judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the futureissuance of additional shares of our capital stock could cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have amaterial effect on the market value of the shares. Further, other than certain participation rights that we have granted in a past offering, our shares do not havepreemptive rights, which means we can sell shares of our capital stock to other persons without offering purchasers in this offering the right to purchase theirproportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your ownership interest in our Company.A number of our outstanding warrants contain antidilution provisions that, if triggered, could cause substantial dilution to our thenexistingstockholders and adversely affect our stock price.A number of our outstanding warrants contain antidilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of ourcommon stock or other securities convertible into our common stock, for a per share price less than the exercise price of certain of our warrants, the exercise pricewill be reduced, subject to certain exceptions. To the extent that we issue or are or deemed to have issued securities for consideration that is less than the exerciseprice of those warrants, holders of our common stock may experience dilution, which may be substantial and which could lower the market price of our securities.Further, the potential application of such antidilution rights may prevent us from seeking additional financing, which would adversely affect our ability to financeour operations and continue to support our growth initiatives.Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including:●variations in the level of expenses related to our research and development;25Table of Contents●any lawsuits in which we may become involved;●regulatory developments affecting our products; and●our execution of any collaborative, licensing or sales agreements, and the timing of payments under these arrangements.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.If we fail to comply with the rules under the Sarbanes Oxley Act of 2002 related to accounting controls and procedures, or if we discover materialweaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult.If we fail to comply with the rules under the SarbanesOxley Act of 2002 related to disclosure controls and procedures, or, if we discover materialweaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be moredifficult. Section 404 of the SarbanesOxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and areport by our independent auditors addressing these assessments. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieveand maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controlsover financial reporting in accordance with Section 404 of the SarbanesOxley Act. Moreover, effective internal controls are necessary for us to produce reliablefinancial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operatingresults could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.Our Certificate of Incorporation, Bylaws and Delaware law may have antitakeover effects that could discourage, delay or prevent a change incontrol, which may cause our stock price to decline.Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transactionwould be beneficial to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potentialacquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Suchprovisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Certificate of Incorporation, Bylawsand Delaware law, as applicable, among other things:●provide the board of directors with the ability to alter the Bylaws without stockholder approval;●place limitations on the removal of directors;●provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum;●require that stockholder actions must be effected at a duly called stockholder meeting and generally prohibiting stockholder actions by writtenconsent;●eliminate the ability of stockholders to call a special meeting of stockholders; and●establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon atduly called stockholder meetings.We are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between apubliclyheld Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more ofa Delaware corporation’s voting stock for a threeyear period following the date that such stockholder became an interested stockholder. These provisions areexpected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to firstnegotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our commonstock and the value of our securities to decline. In addition, rules applicable to TASE listed companies also limit the terms permitted with respect to a new class ofshares and prohibit any such new class of shares from having superior voting rights to the rights of the class of shares listed on TASE.26Table of ContentsIf we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of ourcommon stock and our ability to access the capital markets could be negatively impacted.On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid pricerequirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiesto maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists ifthe deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regaincompliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share fora minimum of 10 consecutive business days. If we do not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance, so long aswe meet the Nasdaq Capital Market continued listing requirements (except for the bid price requirement) and notify Nasdaq in writing of our intention to cure thedeficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second 180dayperiod, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determinationto a Hearings Panel.In addition, on September 6, 2018, we were notified by Nasdaq that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. On October 10, 2018, the Nasdaq Staff concluded that we had regained compliance withits Rule 5550(a)(2) based on the closing bid price of our common stock having been at $1.00 per share or greater from the 10 consecutive business days fromSeptember 20, 2018 to October 9, 2018.Previously, on September 26, 2017, we were notified by Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in NasdaqListing Rule 5550(a)(2) The notification provided that we had 180 calendar days, or until March 26, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Inaddition, on June 5, 2017, we received written notice from the Nasdaq Listing Qualifications Department notifying us that for the preceding 30 consecutive businessdays, our common stock did not maintain a minimum Market Value of Listed Securities of $35 million as required by Nasdaq Listing Rule 5550(b)(2). The notificationprovided that we had 180 calendar days, or until December 4, 2017, to regain compliance with Nasdaq Listing Rule 5550(b)(2). On December 5, 2017, we received asecond written notice from the Listing Qualifications Department of Nasdaq notifying the Company that our failure to regain compliance with Nasdaq Listing Rule5550(b)(2) by December 4, 2017 would result in the Company’s securities being delisted from the Nasdaq Capital Market effective as of the open of business onDecember 14, 2017 unless the Company requested an appeal of such determination. We thereafter requested an appeal before the Hearings Panel, thereby stayingthe delisting of the Company’s securities pending the Hearings Panel’s decision. On January 22, 2018, the Nasdaq Staff concluded that we had regained compliancewith its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater for 10 consecutive business daysfrom January 5, 2018 to January 19, 2018. In addition, on January 26, 2018, the Nasdaq Hearings Advisor informed us that the Nasdaq Staff had informed them thatour Market Value of Listed Securities deficiency (as set forth in its Rule 5550(b)(2)) had been cured, and that we were in compliance with all applicable listingstandards. As a result, the scheduled hearing before the Hearings Panel was cancelled.No assurance can be given that we will continue to meet applicable Nasdaq continued listing standards. Failure to meet applicable Nasdaq continuedlisting standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our commonstock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital throughalternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer businessdevelopment opportunities.The exercise of outstanding warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existingstockholders.As of March 1, 2019, we had outstanding warrants to acquire 2,163,897 shares of our common stock and stock options to purchase 2,441,007 shares of ourcommon stock, which warrants and options are exercisable for prices ranging between $0.04 and $5.00. The expiration of the term of such options and warrants rangefrom July 2019 to December 2023 If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stockowned by our existing stockholders will be diluted.27Table of ContentsWere our common stock to become subject to the penny stock rules then this could result in U.S. brokerdealers becoming discouraged from effectingtransactions in shares of our common stock.Rule 15g9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on the NasdaqCapital Market or do not meet certain net tangible asset or average revenue requirements and if the price of our common stock is less than $5.00, our common stockwill be deemed a penny stock. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accountfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantityof the penny stock to be purchased.In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investmentexperience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person hassufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver,prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on whichthe broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to thetransaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult forinvestors to dispose of our common stock and cause a decline in the market value of our common stock.Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissionspayable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor incases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the accountand information on the limited market in penny stocks.Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares andhave a depressive effect on the price of the shares of our common stock.A portion of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, asamended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements ofRule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides inessence that an affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year afterfiling Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volumeduring the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). Rule 144 also permits, undercertain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a oneyear holdingperiod. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of commonstock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.Prior to our suspension of reporting in 2012, we were a public reporting “shell company,” as defined in Rule 12b2 under the Exchange Act. Although weare no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at anytime previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our stockholders if wehave filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, or the Exchange Act, asapplicable, during the preceding twelve months, other than current reports on Form 8K, at the time of the proposed sale, regardless of whether the restrictedsecurities were initially issued at the time we were a shell company or subsequent to termination of such status. Accordingly, holders of our “restricted securities”within the meaning of Rule 144 will be subject to the conditions set forth in Rule 144 with respect to our company. Other reporting companies that are not formershell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for nonaffiliate reliance on Rule 144.Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any otherpurpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder forus to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding throughthe sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Ourprior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to payfor any acquisitions, which could cause the value of our securities, if any, to decline in value or become worthless.28Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNone.ITEM 2. PROPERTIESWe currently lease 3,380 square feet of office space at 3 Arava Street, Airport City, Israel at a cost of $9,000 per month. The lease was initially for a term oftwo years and commenced in September of 2015 and was subsequently renewed for an additional year. The lease was subsequently renewed again for an additionalyear and will expire in September 2019.ITEM 3. LEGAL PROCEEDINGSOn May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv District Court(Financial Division) to approve an action against us and our officers and directors, as a shareholders’ class action. The complaint alleged, inter alia, that our reportdated April 19, 2017 regarding our engagement with the Israeli Post was false and misleading, and that as a result thereof financial damages have been incurred bytwo purported classes of shareholders: (i) any shareholder who sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directlycaused by such sale, and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanentadverse effect to the shares’ value. The alleged financial damage caused to members of both classes was estimated at NIS 18.8 million. At a hearing held onNovember 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made. On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of NewYork for breach of a Securities Purchase Agreement, or the North Empire Agreement, in which we are seeking damages in an amount to be determined at trial, but inno event less than $616,000. This was preceded by a filing of a Summons with Notice by North Empire against us, also in the same Court, in which they allegedamages in an amount of $11.4 million arising from an alleged breach of the North Empire Agreement. On September 27, 2018, North Empire filed an answer andasserted counterclaims in the action commenced by us against them alleging that we failed to timely deliver stock certificates to North Empire causing damage toNorth Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against Eli Walles and Ronen Luzon asserting similar claims against themin their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed amotion to dismiss North Empire’s thirdparty complaint. We believe, based on the opinion of our legal counsel, it is more likely than not that the counterclaims will bedismissed. We intend to vigorously defend any claims made by North Empire.In addition to the above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats oflitigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify the damages claimed, such claims maynot represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, norcan the amount of possible loss or range of loss, if any, be reasonably estimated.An unfavorable outcome on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products. Asa result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on ourbusiness, results of operations and financial condition.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.29Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket InformationOur stock currently is listed on the Tel Aviv Stock Exchange and the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has been traded on theNasdaq Capital Market since July 25, 2016.HoldersAs of March 1, 2019, we had 60 shareholders of record. The actual number of stockholders is greater than this number of record holders and includesstockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We intend to retain our future earnings, if any, in order to reinvest in thedevelopment and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determinationto pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and suchother factors as our board of directors deems relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to “Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters”, of this Annual Report on Form 10K.Recent Sales of Unregistered SecuritiesOn January 1, 2018, we entered into an agreement with a consultant pursuant to which we issued 99,000 shares of our common stock.On January 10, 2018, we issued 15,000 shares of our common stock to a consultant pursuant to an agreement with a consultant dated March 2, 2017. Underthe agreement, we previously issued 30,000 shares of common stock.On February 20, 2018, we entered into an agreement with a consultant pursuant to which we issued 65,000 shares of our common stock.On May 10, 2018, we issued 90,768 shares of our common stock to a consultant pursuant to an agreement dated December 5, 2016. Under the agreement wepreviously issued 16,600 shares of common stock and an option to purchase 40,000 shares of common stock, which expired unexercised on March 31, 2018.On June 20, 2018, we entered into an agreement with a consultant pursuant to which agreed to issue a threeyear warrant to purchase 20,000 shares ofcommon stock at an exercise of $0.9984 per share, the vesting of which is subject to the achievement of certain performance based milestones.The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since,among other things, the transactions did not involve a public offering.On April 27, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue 300,000 shares of common stock. During 2017,112,500 were issued with a restrictive legend and subsequently registered for resale on a Form S3. During 2018, an aggregate of 156,250 shares were issued underour 2017 Consultant Equity Incentive Plan as registered shares under Form S8. Upon subsequent review, we have determined that the consultant was not eligible toreceive shares under Form S8. The remaining 31,250 will be issued in reliance upon an exemption from the registration requirements under Section 4(a)(2) since,among other things, the transaction does not involve a public offering.On August 28, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 1,230,000 shares ofcommon stock. On January 23, 2018, we entered into an amendment to the agreement pursuant to which certain terms of the options including the number of sharesunderlying the option was reduced to 800,000 shares of common stock. The option was subsequently issued under our 2017 Consultant Equity Incentive Plan,which was covered by a registration statement on Form S8. Upon subsequent review, we have determined that the consultant was not eligible to receive sharesunder Form S8. The option expired unexercised on July 23, 2018.On February 13, 2017, we entered into an agreement with a consultant pursuant to which we agreed to issue options to purchase up to 2,000,000 shares ofcommon stock. On May 16, 2017, the agreement was subsequently amended. The shares issuable upon exercise of the options were registered for resale on Form S3. On January 10, 2018, we issued 781,838 shares of common stock upon partial exercise of the options. We have since determined that the consultant is ineligible toreceive options under our 2017 Consultant Equity Plan and in March 2019 replaced the unexercised and outstanding options with warrants. The options, warrantsand the shares underlying the options and warrants were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of theSecurities Act since, among other things, the transactions did not involve a public offering.ITEM 6. SELECTED FINANCIAL DATAAs a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information.30Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONSYou should read the following discussion along with our financial statements and the related notes included elsewhere in this Annual Report on Form10K. The following discussion contains forwardlooking statements that are subject to risks, uncertainties and assumptions, including those discussed under“Risk Factors.” Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forwardlooking statements.OverviewWe are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,including the ecommerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietarytechnology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloudbasedserver where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or 2 centimeters) are then sent back to the user’smobile device. We believe that the commercial applications for this technology are significant in many areas.Currently, we are focusing on the following market segments:●Ecommerce fashion/apparel industry – our main targetmarket;●Shipping/parcel; and●DIY uses.While we are currently devoting much of our focus on the applications for the ecommerce apparel industry, management believes that all of the abovementioned applications will be useful to users, retailers and vendors alike.Results of OperationsThe table below provides our results of operations for the periods indicated.Year ended December 3120182017(dollars in thousands)Research and development expenses$(1,105)$(845)Marketing, general and administrative expenses(4,070)(4,765)Operating loss(5,175)(5,610)Financial income (expenses), net(794)206Net loss$(5,969)$(5,404)Year Ended December 31, 2018 Compared to Year Ended December 31, 2017Research and Development ExpensesOur research and development expenses for the year ended December 31, 2018 amounted to $1,105,000, an increase of $260,000, or approximately 30.7%,compared to $845,000 for the year ended December 31, 2017. The increase primarily resulted from increased subcontractor expenses and expenses associated withhiring new employees. We expect that research and development expenses will continue to increase in 2019 and that we will recruit additional employees.31Table of ContentsMarketing, General and Administrative ExpensesOur marketing, general and administrative expenses for the year ended December 31, 2018 amounted to $4,070,000, a decrease of $695,000, or 14.5%,compared to $4,765,000 for the year ended December 31, 2017. The decrease compared to the corresponding period was mainly due to a reduction in sharebasedpayment expenses, public and investor relations expenses and professional services which were offset by an increase in marketing expenses. During 2018, we had anexpense of $952,000 in respect of sharebased payments, compared to an expense of $1,557,000 in 2017.Operating LossAs a result of the foregoing, for the year ended December 31, 2018, our operating loss was $5,175,000, a decrease of $435,000, or 7.7%, compared to ouroperating loss for the year ended December 31, 2017 of $5,610,000.Financial Income (Expenses), netOur financial expenses, net for the year ended December 31, 2018 amounted to $794,000 as opposed to financial income, net of $206,000 for the year endedDecember 31, 2017. In 2018, we had financial expenses from the fair value revaluation of warrants offset by income from exchange rate differences and income fromfair value revaluation of investment in marketable securities whereas in 2017 we had financial income primarily due to financial income related to the revaluation ofwarrants which were offset by financial expenses for revaluation of derivatives, loss for marketable securities and interest on short term loan.Net LossAs a result of the foregoing, research and development, marketing general and administrative expenses, and lack of revenues, our net loss for the yearended December 31, 2018 was $5,969,000 compared to net loss of $5,404,000 for the year ended December 31, 2017. The increase in net loss was mainly due to theexpenses with respect to the revaluation of warrants as opposed to an income in the corresponding period and the increase in marketing expenses. The increase innet loss is offset by a decrease in the sharebased payments and public and investor relations services expenses, income with respect to the exchange ratedifferences and income from revaluation of investment in marketable securities as opposed to expenses in the corresponding period. Liquidity and Capital ResourcesSince our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.As of December 31, 2018, we had cash, cash equivalents and restricted cash of $5,230,000 and shortterm deposit and shortterm restricted deposit of$1,390,000 compared to $1,872,000 cash, cash equivalents, restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the publicoffering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.During the year ended December 31, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of commonstock issued in our December 2017 private placement described below. In addition, during 2018, warrants to purchase 444,444 shares of our common stock issued inour October 2017 private placement were exercised for total proceeds of $318,000.On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and fiveyear warrants to purchasean aggregate of 1,500,000 shares of common stock at $2.00 per share and related warrant. The warrants are initially exercisable at $2.65 per share and contain priceprotection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price of the warrants. The net proceeds from theoffering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and fiveyear warrants topurchase an aggregate of 2,874,375 shares of common stock at a price of $0.65 per share and related warrant. The warrants are initially exercisable at an exercise priceof $0.851 per share and contain price protection provisions in the event that we issue certain additional equity securities at a price lower than the exercise price ofthe warrants. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result ofthe public offering, the exercise price of the warrants issued in the October 2017 private placement described below was reduced to $0.715.32Table of ContentsOn October 26, 2017, we entered into securities purchase agreements to sell original issue discount nonconvertible notes, or the Notes, and warrants topurchase 888,888 shares of our common stock to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, beforededucting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equitysecurities or any equitylinked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amendedto the earlier of (i) the closing of our next offering or (ii) March 31, 2018. On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February2018, we repaid the remaining outstanding balance of the Notes. The fiveyear warrants issued in the private offering were initially exercisable at a price of $0.75 pershare. The warrants contain certain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of thewarrants. As a result of the December 2017 offering, the exercise price of the warrants was reduced to $0.715 per share.Net cash used in operating activities was $3,597,000 for the year ended December 31, 2018 compared to $4,140,000 for the year ended December 31, 2017.The decrease in cash used in operating activity is derived from an increase in revaluation of warrants, derivatives, stockbased compensation liabilities andconvertible loan which was offset by a decrease in stock based compensation expense (equity and liability).Net cash used in investing activities for the year ended December 31, 2018 was $1,421,000 compared with net cash used in investing activities of $16,000 forthe year ended December 31, 2017. The net cash used in investing activities for the year ended December 31, 2018 was mainly from investment in short term depositsand restricted deposits compared to purchase of property and equipment during the year ended December 31, 2017.We had positive cash flow from financing activities of $9,040,000 for the year ended December 31, 2018 compared to $5,932,000 for the year ended December31, 2017. The cash flow from financing activities for the year ended December 31, 2018 was due to a public offering of our securities, proceeds from the exercise ofthe warrants as described above and repayment of shortterm loan compared to repayment of a shortterm loan and proceeds from the public offering of oursecurities during the year ended December 31, 2017.We do not have any material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cashbalances as of the date of this Annual Report on Form 10K, we believe we have sufficient cash to fund our obligations for a period which is longer than 12 monthsfrom the date of this Annual Report on Form 10K. However, in order to meet our business objectives in the future, we will need to raise additional capital, which maynot be available on reasonable terms or at all. Additional capital would be used to accomplish the following:●finance our current operating expenses;●pursue growth opportunities;●hire and retain qualified management and key employees;●respond to competitive pressures;●comply with regulatory requirements; and●maintain compliance with applicable laws.33Table of ContentsCurrent conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only onunfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of otherfactors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raiseadditional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business,results of operations and financial condition.To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result insubstantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, andmay include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders ofany of our securities thenoutstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for ourcommon stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capitalraising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the marketprice of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incursubstantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing anddistribution expenses and other costs. We may also be required to recognize noncash expenses in connection with certain securities we issue, such as convertiblenotes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be availableon terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities andgrowth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect onour business, results of operations and financial condition. Recently Issued Accounting PronouncementsCertain recently issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the consolidated financial statementsincluded in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10K.OffBalance Sheet ArrangementsWe have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivativeinstruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest inan unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.Application of Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we haveprepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of thesefinancial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimatesunder different assumptions or conditions.While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report onForm 10K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance,as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) itrequires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making ourestimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.We recognized a liability on behalf of warrants that are exercisable into shares of common stock. These warrants were issued to investors in publicofferings and in private placements and were measured at fair value based on ASC 820. Changes in fair value were recorded in the statements of comprehensive loss.We estimate the share option value using the Monte Carlo option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.34Table of ContentsResearch and development expensesResearch expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date atwhich it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This isgenerally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of ourproducts, no development expenditures have yet been capitalized. Intellectual propertyrelated costs for patents are part of the expenditure for the research anddevelopment projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does notmeet the criteria for capitalization.Equitybased compensation We account for our employees’ sharebased compensation as an expense in the financial statements based on ASC 718. All awards are equity classifiedand therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using the Binomial option pricing model.We recorded stock options issued to nonemployees at fair value, remeasured to reflect the current fair value at each reporting period and recognizedexpenses over the service period. The Company elected to early implement ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBasedPayment Accounting, from October 1, 2018In accordance with ASU 201807, we measured stock options at the implementation date and reclassified the share based payments from a liability sharebased payments awards to equity share based payments awards. The fair value as of the implementation date will be recognized over the remaining service period.We estimate share option grant date fair value using the Binomial option pricing model.The expected volatility of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected futuretrends.The riskfree interest rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zerocoupon bonds with an equivalentterm. The riskfree interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zerocoupon bonds with an equivalent term.We have historically not paid dividends and have no foreseeable plans to pay dividends.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.As a “smaller reporting company” as defined by Item 10 of Regulation SK, we are not required to provide this information. 35Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2018U.S. DOLLARS IN THOUSANDSINDEXPageReport of Independent Registered Public Accounting FirmF2Consolidated Balance SheetsF3Consolidated Statements of Comprehensive LossF4Consolidated Statements of Shareholders’ Equity (Deficit)F5Consolidated Statements of Cash FlowsF6Notes to Consolidated Financial StatementsF7 F34 F1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMy Size, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2018 and 2017, the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit), and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the twoyearperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalWe have served as the Company’s auditor since 2017.Tel Aviv, IsraelMarch 27, 2019F2Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEETSU.S. dollars in thousands (except share data)December 31,Note20182017AssetsCurrent Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000Current Assets:Cash and cash equivalents35,1401,802Restricted cash9070Restricted deposit181Short term deposit1,209Other receivables and prepaid expenses4218381Total current assets6,8382,253Property and equipment, net57167Investment in marketable securities720898279165Total assets7,1172,418Liabilities and shareholders’ equityCurrent liabilities:Shortterm loan11558Trade payables295245Accounts payable276336Warrants, derivatives and stock based compensation liabilities7,101,2522,431Total current liabilities1,8233,570COMMITMENTS AND CONTINGENCIES12SHAREHOLDERS’ EQUITY (DEFICIT)9Stock capital Common stock of $ 0.001 par value Authorized: 100,000,000 and 50,000,000 shares; Issued and outstanding: 29,852,389and 22,238,745, respectively3022Additional paidin capital29,11616,008Accumulated other comprehensive loss(835)(134)Accumulated deficit(23,017)(17,048)Total shareholders’ equity (deficit)5,294(1,152)Total liabilities and shareholders’ equity7,1172,418The accompanying notes are an integral part of the consolidated financial statements.F3Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSU.S. dollars in thousands (except share data and per share data)Year endedDecember 31,Note20182017Operating expensesResearch and development(1,105)(845)Marketing, general and administrative13(4,070)(4,765)Total operating expenses(5,175)(5,610)Operating loss(5,175)(5,610)Financial income (expense), net14(794)206Net loss(5,969)(5,404)Other comprehensive loss:Gain on available for sale securities93Foreign currency translation differences(701)(32)Total comprehensive loss(6,670)(5,343)Basic and diluted loss per share(0.20)(0.30)Basic and diluted weighted average number of shares outstanding29,117,07417,874,827The accompanying notes are an integral part of the consolidated financial statements.F4Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)U.S. dollars in thousands (except share data)Common stockAdditionalpaidinAvailableAccumulatedothercomprehensiveAccumulatedTotalstockholders’equityNumberAmountcapitalfor salelossDeficit(deficit)Balance as of January 1, 201717,405,3591713,347(93)(102)(11,644)1,525Stockbased compensation related to options granted toemployees185185Issuance of shares to consultants159,100(*)147147Total comprehensive loss93(32)(5,404)(5,343)Liability reclassified to equity80,358(*)6060Issuance and receipts on account of shares, net ofissuance cost of $3604,593,92852,2692,274Balance as of December 31, 201722,238,7452216,008(134)(17,048)(1,152)Effect of early adoption of ASU 201807 (**)284284Balance as of January 1, 201822,238,7452216,292(134)(17,048)(868)Stockbased compensation related to options granted toemployees and consultants149149Issuance of shares to consultants343,6501383384Total comprehensive loss(701)(5,969)(6,670)Exercise of warrants and options3,957,62648,6448,648Liability reclassified to equity82,368(*)104104Issuance and receipts on account of shares, net ofissuance cost of $3513,230,00033,5443,547Balance as of December 31, 201829,852,3893029,116(835)(23,017)5,294(*) Represents an amount of less than $1.(**) See Note 2 o(4) for the early adoption of ASU 201807The accompanying notes are an integral part of the consolidated financial statements.F5Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSU.S. dollars in thousandsYear endedDecember 31,20182017Cash flows from operating activities:Net loss(5,969)(5,404)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation3130Revaluation of warrants, derivatives, stockbased compensation liabilities and convertible loan1,632(829)Interest payment of shortterm loan(192)(323)Interest on shortterm deposits(113)Interest received on shortterm deposits18Revaluation of investment in marketable securities(123)623Stock based compensation equity533332Stock based compensation liability4691,297Change in embedded derivative(59)127Decrease in other receivables and prepaid expenses14216Increase (Decrease) in trade payable71(9)Decrease in accounts payables(37)Net cash used in operating activities(3,597)(4,140)Cash flows from investing activities:Investment in shortterm deposits(1,200)Investment in restricted deposits(181)Purchase of property and equipment(40)(16)Net cash used in investing activities(1,421)(16)Cash flows from financing activities:Proceeds from exercise of warrants and options3,945Proceeds from issuance of shares, warrants and shortterm loan5,6496,192Repayment of short term loan, net(554)(260)Net cash from financing activities9,0405,932Effect of exchange rate fluctuations on cash and cash equivalents(664)Increase in cash and cash equivalents3,3581,776Cash and cash equivalents at the beginning of the year1,87296Cash and cash equivalents at the end of the year5,2301,872Non cash activities:Exercise of warrants and sharebased compensation to equity4,70360Sharebased compensation liability reclassified to equity284Derivative liability reclassified to equity104The accompanying notes are an integral part of the consolidated financial statements.F6Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 1 GENERALa.My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel ecommerce market, to the courier services market and to the to Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is drivenby proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of which are incorporated in Israel.References to the Company include the subsidiaries unless the context indicates otherwise.My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registeredin the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, theCompany changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field ofcardiology and urology.Since September 1, 2005, the Company has traded on the Tel Aviv Stock Exchange (“TASE”).Between 2007 and 2012 the Company reported as a public company with the U.S. Securities and Exchange Commission (the “SEC”). In August2012, the Company suspended its reporting obligations under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. In mid2015 theCompany resumed reporting as a public company.On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’sshares of common stock are listed both on the Nasdaq Capital Market and TASE.b.On January 9, 2014, at the Company’s general meeting of shareholders, its shareholders approved an engagement with one of the Company’sinvestors (the “Seller”) for the purchase of rights in a Venture (the “Venture”), including the rights to the method and the certain patent applicationthat had been filed by the Seller (the “Assets”). The Venture relates to the development of technologies and applications which will assist theconsumer to take his or her body measurements accurately using a mobile device to ensure the purchase of clothing with the best possible fitwithout the need to try them on.In February 2014, the Company established a whollyowned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel, which iscurrently engaged in the development of the Venture described above.In return for purchasing an interest in the Venture, the Company undertook to pay the Seller 18% of the Company’s operating profit, direct orindirect, connected to the Venture for a period of seven years starting from the end of the Venture’s development period.As part of the agreement, the Seller received an option to buy back the Assets for consideration which will reflect the market fair value at that time,on the occurrence of the following events: a) if a motion is filed to liquidate the Company; b) if seven years after signing the agreement, theCompany’s total accumulated revenues, direct or indirect, from the Venture or the commercialization of the patent will be lower than NIS 3.6 million.In such an event, Seller may repurchase the interest in the Venture at a market price to be determined by an independent third party valuationconsultant, who shall be chosen by agreement by the parties, and the audit committee shall conduct the negotiations on behalf of the Company todetermine the identity of the consultant.c.Since inception, the Company has incurred significant losses and negative cash flows from operations and as of December 31, 2018, hasaccumulated loss of $23,017. The Company has financed its operations mainly through fund raising from various investors.Management’s plans contemplate that cash and cash equivalents as well as the shortterm deposit will be sufficient to meet its obligations for aperiod which is longer than 12 months.d.The Company operates in one reportable segment and all of its longlived assets are located in Israel.F7Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S.GAAP”).a.Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.b.Financial statements in U.S. dollars:The presentation currency of the financial statements is the U.S. dollar.The majority of the Company and its subsidiaries expenses are denominated in New Israeli Shekel (“NIS”). Therefore, the Company’s managementbelieves that the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is theNIS and thus its functional currency. The financial statements are translated as follows:1.Assets and liabilities at the end of each reporting period (including comparative data) are translated at the closing rate at the end of thereporting period.2.Income and expenses for each period included in profit or loss (including comparative data) are translated at average exchange rates for therelevant periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of thetransactions.3.Stock capital, capital reserves and other changes in capital are translated at the exchange rate prevailing at the date of incurrence.4.Accumulated deficit is translated based on the opening balance translated at the exchange rate at that date and other relevant transactionsduring the year are translated as described in 2) and 3) above.5.All resulting translation adjustments are recognized as a separate component of accumulated other comprehensive loss in equity.F8Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)c.Principles of consolidation:The consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries. All intercompany balances andtransactions have been eliminated upon consolidation.d.Cash equivalents:Cash equivalents are shortterm highly liquid investments that are readily convertible to cash with original maturities of three months or less at thedate acquired.e.Property and equipment:Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straightline method over theestimated useful lives of the assets, at the following annual rates:%Computers and peripheral equipment33Office furniture and equipment715Leasehold improvementsOver the term of the lease or the useful life of theimprovements, whichever is shorterf.Impairment of longlived assets:The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by theassets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less sellingcosts. During the periods ended December 31, 2018 and 2017, no impairment losses have been recorded.g.Severance pay:The Company’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employeesin Israel are entitled to have monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf to their insurance funds. Payments inaccordance with Section 14 exempt the Company from any additional obligation for these employees. As a result, the Company does not recognizeany liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balancesheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits.F9Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)h.Research and development costs:Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are forwages and subcontractors.i.Income taxes:The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s taxreturns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enactedtax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assetswill be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely thannot that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferredtax assets to the amount more likely than not to be realized. As of December 31, 2018, and 2017, a full valuation allowance was established by theCompany.The Company implements a twostep approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the taxposition taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that,on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigationprocesses. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to berealized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as ofDecember 31, 2018 and 2017 the Company has not recorded a liability for unrecognized tax benefits.j.Accounting for stockbased compensation:The Company accounts for its employees sharebased compensation as an expense in the financial statements based on ASC 718. All awards areequity classified and therefore such costs are measured at the grant date fair value of the award. The Company estimates share option grant datefair value using the Binomial option pricing model (For details see Note 10).The Company recorded stock options issued to nonemployees at fair value, remeasures to reflect the current fair value at each reporting periodand recognizes expenses over the related service period. The Company elected to early implement ASU 201807, see Note 2 o(4).The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The riskfree interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield fromUS treasury zerocoupon bonds with an equivalent term.The Company has historically not paid dividends and has no foreseeable plans to pay dividends.k.Fair value of financial instruments:ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework formeasuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market dataobtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptionsdeveloped based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. Inaddition, the fair value of assets and liabilities should include consideration of nonperformance risk, which for the liabilities described belowincludes the Company’s own credit risk.F10Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)As a basis for considering such assumptions, ASC 820 establishes a threetier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value:Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuationadjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily andregularly available in an active market, valuation of these products does not entail a significant degree of judgment.Level 2 Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, eitherdirectly or indirectly.Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative ofexpected future trends.The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaidexpenses, shortterm loan, trade payables and accounts payable approximate their fair value due to the shortterm maturities of such instruments.The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publiclytraded company onthe OTCQB.Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for anotherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the salesrestrictions and is therefore, ranked as Level 2 asset. l.Convertible loan:The Company applied ASC 47020 and ASC 815 to the convertible loan.m.Basic and diluted net loss per share:Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted netincome per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutivepotential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the yearsended December 31, 2018 and 2017 all outstanding options and warrants have been excluded from the calculation of the diluted net loss per sharesince their effect was antidilutive.F11Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)n.Concentrations of credit risk:Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash andcash equivalents.Cash and cash equivalents and short term deposits are invested in banks in Israel and United States. Such deposits in Israel may be in excess ofinsured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investmentsare financially sound and, accordingly, minimal credit risk exists with respect to these investments.The Company and its subsidiaries have no offbalancesheet concentration of credit risk such as foreign exchange contracts, option contracts orother foreign hedging arrangements.o.Impact of recently issued accounting standard:1.In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 201601 (ASU201601) “Financial InstrumentsOverall (Subtopic 82510): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU201601 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendmentsshould be applied by means of a cumulativeeffect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, withother amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 201601 iseffective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.The Company adopted this guidance as of January 1, 2018. As of the adoption date, no available for sale capital reserve existed and as such,no material impact over the Company’s financial statements.During the year ended December 31, 2018, the Company recorded a gain of $123 for changes in the fair value of the investment in marketablesecurities in the statements of comprehensive loss as financial income and not as other comprehensive income.2.In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginningofperiod and endofperiod total amounts shown on the statement of cash flows. The guidance is effective for fiscal yearsbeginning after February 15, 2017, and interim periods within those fiscal years.The Company adopted this guidance retrospectively as of January 1, 2018.3.In August 2016, the FASB issued ASU 201615, Classification of Certain Cash Receipts and Cash Payments, which provides guidance onseveral issues related to cash flows classifications.The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal shortterm loanwas classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in thestatements of cash flows to cash flows from operating activities. The guidance is effective for fiscal years beginning after December 15, 2017,and interim periods within those fiscal years.During the year ended December 31, 2018, interest expenses on the shortterm loan are classified in the statement of cash flows as cash flowfrom operating activities in the amount of $192.F12Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.)4.On June 20, 2018, the FASB issued ASU 201807, Stock Compensation: Improvements to Nonemployee ShareBased Payment Accounting, toalign the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 50550, EquityEquityBased Payments to NonEmployees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018.Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.The Company elected to early adopt the guidance as of October 1, 2018.The ASU affected the measurement and classification of the sharebased payments to consultants in the Company’s financial statements. Thefair value of each agreement at the adoption date is being considered as the new fair value of the sharebased payments to consultants andthe expenses will be recognized over the remaining service period. Furthermore, as of the adoption date, sharebased payments to consultantswere classified as equity.Due to the early adoption, an amount of $284 was classified from liabilities to equity and no further fair value measurement will be required forthese sharebased payments.p.Impact of recently issued accounting standard not yet adopted:In February 2016, the FASB issued ASU 201602, Leases (Topic 842) (“ASU 201602”). ASU 201602 is intended to increase transparency andcomparability of accounting for lease transactions. For all leases with terms greater than twelve months, the new guidance will require lessees torecognize rightofuse assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative informationabout lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of leases inthe statement of operations and statement of cash flows is largely unchanged, ASU 201602 is effective January 1, 2019. In July 2018, the FASBissued ASU 201811, Leases Targeted Improvements, to allow a company to elect an optional modified retrospective transition method thatapplies the new lease requirements through a cumulativeeffect adjustment in the period of adoption. Effective January 1, 2019, the Companyadopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date.The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among otherthings, allowed the Company to carry forward the historical lease classification. Applying ASU 201602 is expected to result an increase of $139 inthe balance of rightofuse assets and an increase in current liabilities on lease at the date of initial application.q.Commitments and ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.r.Derivative instrumentsThe Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. F13Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 3 CASH AND CASH EQUIVALENTSThe Company’s cash and cash equivalents balance at December 31, 2018 and 2017 is denominated in the following currencies:December 31,20182017US Dollars4,8791,784Euro4New Israeli Shekels257185,1401,802NOTE 4 OTHER RECEIVABLES AND PREPAID EXPENSESDecember 31,20182017Prepaid expenses and deferred costs13055Government authorities2742Receivable on account of shares275Insurance reimbursement50other119218381NOTE 5 PROPERTY AND EQUIPMENT, NETComputersandperipheralequipmentOfficefurnitureandequipmentLeaseholdimprovementsTotalCostBalance as at January 1, 2017741815107Additions15116Translation adjustments91212Balance as at December 31, 2017982017135Balance as at January 1, 2018982017135Additions32840Translation adjustments(10)(2)(12)Balance as at December 31, 20181202815163Accumulated DepreciationBalance as at January 1, 2017282333Additions271230Translation adjustments55Balance as at December 31, 2017603568Balance as at January 1, 2018603568Additions272231Translation adjustments(6)(1)(7)Balance as at December 31, 2018815692Carrying amountsAs at December 31, 201738171267As at December 31, 20183923971F14Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 6 RELATED PARTY TRANSACTIONSA. Balances with related parties:The following related party payables are included in trade payable and accounts payable.December 31,20182017Officers (*)26176Directors1111Monkeytech (**)31240199(*) The amount includes the net salary payable.(**) The Chief Technology Officer of the Company, Oded Shoshan, is compensated pursuant to a technology consulting agreement between theCompany and Monkeytech Ltd. Mr. Shoshan is the chief executive officer and one of the owners of Monkeytech.B. Related parties benefits:Year endedDecember 31,20182017Salaries and related expenses792592Share based payments101154Directors5746Research and development expenses to subcontractor164841,114876NOTE 7 FINANCIAL INSTRUMENTSThe following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classificationwithin the fair value hierarchy:December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities208December 31, 2018Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, derivative and stock based compensation liabilities1,252December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial assetsInvestment in marketable securities98F15Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 7 FINANCIAL INSTRUMENTS (Cont.)December 31, 2017Fair value hierarchyLevel 1Level 2Level 3Financial liabilitiesWarrants, Derivatives and stock based compensation liabilities2,431The carrying amounts of cash and cash equivalents, restricted cash, restricted deposit, short term deposit, other receivables and prepaid expenses,shortterm loan, trade payable and accounts payable approximate their fair value due to the shortterm maturities of such instruments.At December 31, 2018, the recognized gain (loss) and fair value (based on quoted market prices with a discount due to security restrictions on IMineshares) of the marketable securities were $123 and $208, respectively (at December 31, 2017 $(623) and $98, respectively).NOTE 8 TAXES ON INCOMEa.At December 31, 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $16,489 available to reduce futuretaxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions ofthe Internal Revenue Code of 1986.The U.S Company has final tax assessments through 2012.On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, loweringthe U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporateincome tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income taxexpense in 2017 due to the revaluation of the valuation allowance.b.Foreign tax:1.Tax rates:Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiaries:2017 24%2018 23%On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) 2016, by which,inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving BudgetObjectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. Thefirst step was to a rate of 24% as of January 2017 and the second step was to a rate of 23% as of January 2018.As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculatedaccording to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in theYears 2017 and 2018), at the tax rate expected to apply on the date of reversal.F16Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)2.The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately$45,320 as of December 31, 2018. Of these losses, a total of $39,296 are owned by Topspin Medical (Israel) Ltd. Topspin tax losses may beoffset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The otherlosses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time.3.Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments.c.U.S. and foreign components of loss from continuing operations, before income taxes consisted of:December 31,20182017U.S(4,131)(1,419)NonU.S. (foreign)(1,838)(3,985)(5,969)(5,404)d.Deferred taxes:Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:December 31,20182017Deferred tax assets:Operating loss carryforwards14,38014,327Warrants and options60(11)Marketable securities336519Temporary differences212Deferred tax assets before valuation allowance14,98814,835Valuation allowance(14,988)(14,835)Net deferred tax assetThe following table presents a reconciliation of the beginning and ending valuation allowance:December 31,20182017Balance at beginning of the year14,83514,515Additions in valuation allowance to the income statement8761,120Reductions in valuation allowance due to exchange rate differences and change in tax rate(723)(800)Balance at end of the year14,98814,835In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred taxassets will not be realized.The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporarydifferences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuationallowance at December 31, 2018 and 2017.F17Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 8 TAXES ON INCOME (Cont.)e.Theoretical taxThe following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:December 31,20182017Loss before income taxes5,9695,404Statutory tax rate21%34%Theoretical tax benefit1,2531,837Foreign tax rate differences and exchange rate differences38(445)Nondeductible expenses(415)(272)Change in valuation allowance(876)(1,120)Taxes on incomeNOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT)a.Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right toreceive dividends if declared.b.On June 10, 2016, the Company was notified that its listing application for the Nasdaq Capital Market (“Nasdaq”) had been approved. The sharesbegan trading on July 25, 2016. On July 14, 2016, the Company’s Board of Directors resolved to act according to the provisions of certainconvertible loan agreements which were signed by the Company and to carry out an automatic conversion (which was triggered by the exchangelisting) of such loans into Company shares subject to its receipt of the consideration and the approvals required by law. Accordingly, theCompany issued the shares for the convertible loans, the allotment of which had been approved by the requisite stock exchanges and theconsideration for which had been received. The Company issued 2,091,566 shares of common stock for convertible loans for total consideration of$7,320.F18Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)c.On February 13, 2017, the Company entered into a Securities Purchase Agreement pursuant to which it received an aggregate purchase price of$200 for 200,000 shares of Company common stock, and warrants to acquire 250,000 shares of common stock at exercise price of $3.50 which wereexercisable for a period of ten months. In 2017, the options expired without being exercised.d.On August 16, 2017, the Board of Directors approved agreements with three private investors for total consideration of $780 in exchange for780,000 shares of common stock of the Company.During 2017, the Company received a total of $627 out of the investment. The remaining amount was secured by a guarantee from a financialinstitution and recorded as other receivables as of December 31, 2017. In 2018, the balance was received in cash.e.On December 22, 2017, the Company completed a public offering of 3,832,500 shares of its common stock to the public at $0.65 per share and fiveyear warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. Total consideration from thepublic offering was of $2,490. The proceeds net of issuance costs were $2,130.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at fair value and accounted for $1,625, and the residual net amount of $505 was recorded in equity.As of December 31, 2018, the warrants were presented in the balance sheet at fair value of $124.The warrants include antidilution price protection, in the event that the Company will issue additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants. In addition, upon the Company’s entering into an agreement to issue securitiesthat are issuable at a price which varies or may vary with the market price of the Company’s common stock (the “Variable Price”), the holder of thewarrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold by the Company pursuant to theagreement.During the year ended December 31, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds tothe Company of $2,260.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value1,625124Strike Price$0.851$0.851Dividend Yield %Expected volatility89.5%88%Risk free rate2.26%2.52%Expected term53.98Stock Price$0.71$0.77F19Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)f.On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of itscommon stock and fiveyear warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for grossproceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.The common stock and warrants are accounted for as two different components.Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in thestatements of comprehensive loss.The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,547 was recorded in the equity.As of December 31, 2018, the warrants were presented in the balance sheet at a fair value of $862.The warrants include antidilution price protection in the event that the Company issues additional shares of common stock or common stockequivalents at a price lower than the exercise price of the warrants, subject to customary exceptions. In addition, upon the Company’s enteringinto an agreement to issue securities that are issuable at a price which varies or may vary with the market price of the Company’s common stock(the “Variable Price”), the holder of the warrant may elect to adjust the exercise price of the warrants to the Variable Price of the securities sold bythe Company pursuant to the agreement.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo Model:Day ofissuanceAs ofDecember 31st,2018Fair Value2,102862Strike Price$2.65$2.65Dividend Yield %Expected volatility96.7%87.2%Risk free rate2.59%2.52%Expected term54.09Stock Price$1.69$0.77F20Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 9 SHAREHOLDERS’ EQUITY (DEFICIT) (Cont.)g.A summary of the warrant activity during the years ended December 31, 2018 and 2017 is presented below:Number ofWarrantsWeightedAverageExercisePriceWeightedAverageRemainingLife inYearsOutstanding, December 31, 20161,977,2814.69Issued4,013,263Expired or exercised(1,965,803)Outstanding, December 31, 20174,024,7411.10Issued1,500,000Expired or exercised(3,360,844)Outstanding, December 31, 20182,163,8972.104.06Exercisable, December 31, 20182,163,8972.104.06As of December 31, 2018 and 2017 the warrants that were issued during the year ended December 31, 2018 and 2017, respectively were deemed to be aderivative liability.NOTE 10 STOCK BASED COMPENSATIONThe stockbased expense recognized in the financial statements for services received is related to Research and Development, Marketing and Generaland Administrative expenses as shown in the following table:Year endedDecember 31,20182017Stockbased compensation expense – Research and development5072Stockbased compensation expense Marketing, general and administrative9521,5571,0021,629The division of the stockbased expenses between equity and liability recorded in the financial statements is as shown in the following table: Year endedDecember 31,20182017Stockbased compensation expense equity awards533332Stockbased compensation expense liability awards4691,2971,0021,629F21Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Options issued to consultantsa.In December 2016, the Company entered into a consulting agreement with a consultant (“Consultant1”) pursuant to which Consultant1 providedservices in connection with marketing strategies, micro and macroeconomic issues for the promotion of the Company’s marketing, business,products and operations through smartphone applications. The agreement was for a period of 18 months commencing October 2016.In consideration for services provided under the consulting agreement, the Company agreed to issue to Consultant1 25,000 shares of commonstock of the Company. In October 2017, 16,600 shares of common stock of the Company were issued to Consultant1. In addition, the Company hasissued to Consultant1 stock options to purchase up to 40,000 shares of the Company’s common stock at an exercise price of NIS 18 ($5.19) pershare. The options were not exercised and expired on March 31, 2018.In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS 500,000($144). If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Companyagreed to pay Consultant1 the difference. The Company had the discretion whether to make such payment in cash or shares of common stock.On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’sAnnual Meeting of Stockholders.During 2018 and 2017, share based costs in the sum of $0 and $7 respectively, were recorded by the Company and the balance as of December 31,2018 and 2017 was $0 and $126 respectively, according to the fair value measurement.In May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company plus an additional 8,400 shares ofcommon stock on account of the original 25,000 shares of common stock and as of December 31, 2018, the Company has no further obligation toConsultant1.b.In December 2016, the Company engaged a consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy andpublic relations, including potential investors relations. For such consulting services, the Company issued to Consultant2 options to purchase upto 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The options are exercisablefor periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months. The issuance of the options under theagreement was subject board and shareholder approval as required. The equity incentive plan for consultants was approved by the shareholderson March 21, 2017 at the Company’s Annual Meeting of Stockholders.On May 16, 2017, the Company and Consultant2 entered into an amendment to the consulting agreement pursuant to which the exercise prices ofthe options were amended to a range from $1.50 to $5.00 per share.The share based cost recognized during the years 2018 and 2017, including the cost associated with the consulting service attributed to thereporting period and the revaluation of the options amounted to $549 and $1,048, respectively.In January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314. In September 2018, options to purchase up to 218,192 shares of common stock of the Company were not exercised and expired. In addition, in 2018, an amount of $203 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.c.In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the Company with respect to financing and strategicadvisory for a period of two years. For such consulting services, the Company agreed to pay a monthly retainer and agreed to issue toConsultant3 50,000 shares of the Company common stock and 31,250 shares each quarter thereafter.In December 2017, the Company issued 112,500 shares of common stock to Consultant3 and during 2018, the Company issued an aggregate of156,250 shares of common stock to Consultant3.During the years 2018 and 2017, costs in the sum of $192 and $109, respectively, were recorded as a stockbased compensation expense relating toequity awards.F22Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)d.In July 2017, the Company engaged a consultant (“Consultant4”) to provide services to the Company with respect to business consulting for aperiod of one year. For such consulting services, the Company issued to Consultant4 150,000 stock options to purchase up to 150,000 shares ofthe Company’s common stock at an exercise price of $2 per share. The options vest in four equal installments on a quarterly basis and terminate 18months from each vesting date. During the years 2018 and 2017, costs in the sum of $70 and $7 were recorded as stockbased liability awards. Inaddition, in 2018, an amount of $7 was classified to equity following the adoption of ASU 201807, see also note 2 o 4.e.In August 2017, the Company engaged a consultant (“Consultant5”) to provide services to the Company with respect to various servicesincluding corporate planning, financial public relations, business strategy and shareholders relations. For such consulting services, the Companyagreed to issue to Consultant5 options to purchase 1,000,000 shares of the Company’s common stock at an exercise prices of $1.00 per shareexercisable until April 30, 2018 and 230,000 options to purchase common stock at exercise price of $2.5 per share exercisable until December 31,2018. The board approved the issuance on August 31, 2017.In January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of theoptions and the exercise prices of the options were amended to 800,000 options at $1.00 per share exercisable until July 23, 2018.The options were not exercised and expired on July 23, 2018.f.In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting andinvestor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant699,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April andAugust 2018. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 99,000 shares of common stock to Consultant6.During 2018, an amount of $112 was recorded as a stockbased equity award with respect to Consultant6.g.In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting services relating to investorrelations. Pursuant to the agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of commonstock of the Company. Under the agreement, the shares vested as follows: 50,000 shares shall vest upon the effective date of the agreement and15,000 shares vest three months after the effective date of the agreement. The board approved the issuance on February 14, 2018.In February 2018, the Company issued 50,000 shares of common stock to Consultant 7 and in May 2018, the Company issued 15,000 shares ofcommon stock to Consultant7.During 2018, an amount of $77, was recorded by the Company as a stockbased expense equity awards with respect to Consultant7.F23Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)h.In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to theCompany including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of theConsultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options vestquarterly in four equal installments and terminate eighteen (18) months from their respective vesting dates. The issuance of the options under theagreement was subject to the increase in the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders onFebruary 12, 2018 at the Company’s special meeting of stockholders.During 2018 and 2017, an amount of $73 and $1 was recorded by the Company as a stockbased liability awards and stockbased equity awardsrespectively, with respect to the Consultants. In addition, in 2018, an amount of $60 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.i.In February 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company includingimproving the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant8 options to purchase up to 5,500 shares of the Company’s common stock at an exercise price of $1.41 per share. Theoptions are fully vested and shall terminate five years after the grant date.During 2018, amount of $5 was recorded by the Company as a stockbased liability awards, with respect to Consultant8. In addition, in 2018, anamount of $4 was classified to equity following the adoption of ASU 201807, see also Note 2 o 4.j.In February 2018, the Company entered into an agreement with a consultant (“Consultant9”) to provide services to the Company includingmarketing and improving the implementation of the technology with potential customers. Pursuant to such agreement and in consideration forsuch consulting services, the Company agreed to issue to Consultant9 options to purchase up to 15,000 shares of the Company’s common stockat an exercise price of $2 per share. The options shall vest quarterly in three equal installments and shall terminate five years after the grant date.During 2018, amounts of $4 and $1 were recorded by the Company as stockbased expense liabilityawards and stockbased expense equityawards respectively, with respect to Consultant9. In addition, in 2018, an amount of $7 was classified to equity following the adoption of ASU201807, see also note 2 o 4.k.In August 2018, the Company entered into an agreement with a consultant (“Consultant10”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant10 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share.The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The board approved the issuance onAugust 15, 2018.During 2018, amounts of $2 and $6 were recorded by the Company as stockbased liabilityawards and stockbased expense equity awardsrespectively, with respect to Consultant10. In addition, in 2018, an amount of $3 was classified to equity following the adoption of ASU 201807,see also note 2 o 4.F24Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)l.In December 2018, the Company entered into an agreement with a consultant (“Consultant11”) to provide services to the Company includingpromoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Companyagreed to issue to Consultant11 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $0.755 per share.The options shall vest quarterly in four equal installments and shall terminate five years after the grant date. The board approved the issuance onDecember 27, 2018.During 2018, an amount of $1 was recorded by the Company as a stockbased equityawards with respect to Consultant11.The Company’s outstanding options granted to consultants as of December 31, 2018 are as follows:Issuance dateOptions forCommon stockWeightedAverageexercise priceper shareOptionsexercisableExpirationdateApril 201246,007NIS0.1546,007April 2022September 201460,000NIS1.660,000September 2020September 201435,000NIS1.635,000September 2020May 20171,150,000USD3.961,150,000March 2019March 2020October 2017150,000USD2150,000July 2019April 2020February 201820,500USD1.8420,500February 2021February 2023August 2018December 2018100,000USD0.886,250August 2023December 2023Total1,561,5071,467,757The Company uses the Black & Scholes model to measure the fair value of the stock options with the assistance of a third party valuation.The fair value of the Company’s stock options granted to nonemployees was calculated using the following weighted average assumptions:Year ended December 31,Year ended December 31,20182017Dividend yield0%0%Expected volatility84%102%87%130%Riskfree interest2.02%2.97%1.2%2.3%Contractual term of up to (years)1.150.25F25Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 10 STOCK BASED COMPENSATION (Cont.)Stock Option Plan for employeesIn March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stockoptions to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, islimited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date ofgrant.The fair value of each option award is estimated on the date of grant using the Binomial optionpricing model that used the weighted averageassumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at thetime of grant.2017grants2018grantsDividend yield0%0%Expected volatility87.73%88.43%Riskfree interest0.7%3.04%Contractual term of up to (years)4.74.7 5Suboptimal exercise multiple (NIS)55In the years ending December 31, 2018 and 2017, 159,500 and 925,500 options, respectively, were granted.The total stock option compensation expense in the year ending December 31, 2018 amounted to $139 as follows: R&D expenses amounted to $50and Marketing, general and administrative expenses amounted to $89.As of December 31, 2018, there was a total of $83 unrecognized compensation cost relating to nonvested sharebased compensationarrangements. That cost is expected to be recognized over a weightedaverage period of 1.02 years.Share option activity during 2018 is as follows:2018Number ofoptionsWeighted averageexercise price US$Outstanding at January 1925,5001.21Granted159,5000.91Exercised(26,666)Expired(28,834)Outstanding at year end1,029,500$1.16Vested at year end823,332$1.21Share option activity during 2017 is as follows:2017Number ofoptionsWeighted averageExercise price US$Outstanding at January 1Granted925,500$1.21Outstanding at year end925,500$1.21Vested at year end113,667$1.21F26Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 11 SHORT TERM LOANOn October 26, 2017, the Company entered into a loan agreement with certain accredited investors in a private placement transaction for totalconsideration of $1,200. The Company was required to repay a principal amount of $1,333 and to issue 888,888 warrants to purchase up to 888,888shares of the Company’s common stock.The loan will be due on the earlier of the four month anniversary from the date received or the completion of an additional equity offering. The warrantshave a fiveyear term and are exercisable at a price of $0.75 per share. The warrants carried out price protection, in the event that the Company willissue additional warrants or common shares at a price lower than the exercise price of the warrants, if the first subsequent placement will occur withinsix months of the date of issuance of the warrants, then the applicable price shall be reduced to onehundred and ten percent of the new issuance priceof such subsequent placementOn December 20, 2017, the Company completed a public offering (see note 9 e) and the exercise price was reduced to $0.715.The warrants and loan are accounted for as two different components.At the date of issuance, warrants exercisable into shares of common stock are recognized as a liability and measured at fair value of $523 and the loanis measured as the residual between the proceeds from the issuance and the fair value allocated to the warrants at $595, net of $82 issuance costs.As of December 31, 2018 and 2017, the warrants were measured at fair value of $257 and $467, respectively. Changes in fair value of the warrants arerecorded in the statement of comprehensive loss.During the years 2018 and 2017, the Company recorded financial expenses from the loan in the amounts of $192 and $532 respectively.On December 27, 2017, the Company repaid $583 from the loan and during February 2018, the Company repaid the remaining outstanding balance.During 2018, warrants to purchase 444,444 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of$318.Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.The following table sets forth the assumptions used to measure the fair value of the warrants using the Monte Carlo ModelDay ofissuanceAs ofDecember 31st,2017As ofDecember 31st,2018Fair Value$523$467$257Strike Price$0.75$0.715$0.715Dividend Yield %Expected volatility86.73%92.03%88.96%Risk free rate2.11%2.23%2.51%Expected term54.823.8Stock Price$0.75$0.655$0.77F27Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTSa.On September 9, 2015, fourteen shareholders filed a complaint against the Company and its Chief Executive Officer, Ronen Luzon, alleging that inaccordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stockmarket, while the Company allegedly breached its obligation to register the plaintiffs’ shares. On November 5, 2015, the Company filed its defenseand a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. EitanNahum. In its counter claim, the Company alleged that the agreements by force of which the counter defendants hold their shares are defunct,based on fraud, as the counter defendants never paid and never intended to pay the agreed upon consideration for their shares. The Companyfurther alleged that Mr. Shmuelevitch used his position as a director and controlling stockholder of the Company to knowingly cause theCompany to enter such defunct agreements. On September 5, 2017, the court rendered a judgment pursuant to which the complaint against theCompany was accepted, the complaint against Ronen Luzon was rejected and the Company’s counterclaim was rejected. The judgment included:(1) a declaratory remedy, under which the Company breached its contractual undertakings toward the plaintiffs, to list their shares both on TASEand on the Nasdaq Capital Market; (2) an order that the Company take any and all actions required for the listing of the plaintiffs’ shares, includinginstructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs’ stock certificate and to issue them withnew stock certificates free and clear from any restriction; (3) an order that the registration company of Bank Hapoalim electronically list all of theplaintiffs’ shares detailed in the complaint on the electronic trading system; and (4) an order that the Company pay the plaintiffs’ costs in theamount of NIS 70,000. On October 3, 2017, the Company appealed the judgment with the Supreme Court of Israel, and simultaneously, filed withthe Supreme Court a Motion for Stay of Execution of the judgement, pending the outcome of the appeal. On November 8, 2017, the Supreme Courtupheld the Motion to Stay and ordered that the execution of the judgment will be stayed pending the outcome of the appeal, provided that theCompany deposit in the Supreme Court’s treasury an autonomous Israeli CPI linked bank guarantee in an amount of NIS 1,700,000, to cover therespondents’ potential damages should the appeal be ultimately denied. The Company did not deposit the bank guarantee in the amount of NIS1,700,000 and will instead register the shares held by the plaintiffs on TASE and on the Nasdaq Capital Market.On November 16, 2017, the Company deposited NIS 45,000 with the Supreme Court to cover respondents’ potential legal costs if the appeal isultimately denied.On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company)(collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes,remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connectionwith the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch),requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the“Motion to Dismiss”).Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he isentitled to the reimbursement of his cost in connection with the appeal and the original claim.On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.F28Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)b.On December 15, 2015, a legal complaint was filed naming the following as defendants: the Company, all the members of the Board of Directors,Mrs. Shoshana Zigdon, a shareholder and related party in the Company, as well as two additional defendants who are not shareholders, officers ordirectors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares (the “Original Shares”) for trade withthe Tel Aviv Stock Exchange TASE causing a total of NIS 2,622,500 ($756,418 as of December 31, 2017) damage. The plaintiff seeks relief againstthe defendants through financial compensation at the rate of the aforementioned alleged damage; additional compensation of NIS 400,000($115,374 as of December 31, 2017) due to mental anguish; and if and to the extent that until the time the plaintiff can sell its shares on the Tel AvivStock Exchange TASE (the “Exercise Date”), if the rate price of a Company shares common stock rises above the amount of NIS 20.98 (the “BaseRate”), an additional amount at the rate of the difference between the Base Rate and the highest rate of a share of Company share common stockbetween the time the claim was submitted and the Exercise Date; and also court costs and attorney fees.All pretrial preliminary proceedings as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.On June 20, 2017, the Company and plaintiff entered into a settlement agreement (the “Settlement Agreement”) dated June 20, 2017 following amediation process. Pursuant to the Settlement Agreement, the Company agreed to pay the plaintiff NIS 325,000 ($93,741 as of December 31, 2017)(the “Payment”) within 30 days of the date of the Settlement Agreement. Additionally, the Company was obligated to register the Original Shareswithin a specified time frame. Moreover, pursuant to the Settlement Agreement, the Company agreed to issue, within 60 days, 80,358 additionalshares of common stock to the plaintiff (the “New Shares”), which shall be registered, to be deposited in escrow and sold for the benefit ofplaintiff. To the extent the Company does not issue the unrestricted New Shares within 60 days of the date of the Settlement Agreement, theplaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the complaint, provided he deposits the Payment in anescrow account, pending the court’s final adjudication of the complaint. Additionally, the Settlement Agreement provides that to the extent theaggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS 1,600,000, the Company will either pay the differencein cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion. If the Company does notcomply with the terms of the Settlement Agreement, the plaintiff may resume the legal proceedings which could result in substantial costs,diversion of management’s attention and diversion of the Company’s resources.During 2017, the Company registered the Original Shares, issued the New Shares and paid the plaintiff the Payment. As of December 31, 2017, theCompany recorded a derivative liability in the amount of $194 in respect of the amount payable pursuant to the terms of the Settlement Agreement,and an amount of $60 in equity in respect of the of issuance of the New Shares.On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. OnJanuary 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli NewShekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares”means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’scommon stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13,2018, the Company paid the plaintiff the Additional Amount.F29Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)c.On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion with the Tel Aviv DistrictCourt (Financial Division) to approve an action against the Company and the Company’s officers and directors, as a shareholders’ class action.The complaint alleges, inter alia, that the Company’s report dated April 19, 2017 regarding its engagement with the Israeli Post was false andmisleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder whosold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale and (ii) any shareholderwhich held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent adverse effect to the shares’value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8 million. The Company reviewed the motion initiallywith its legal counsel and retained an expert to review and analyze the allegations and data upon which the motion is based. The Company’smanagement, after considering the conclusions of a report issued by a third party expert and an opinion of U.S. legal counsel, is of the opinionthat the chances that the class motion will be denied exceed the risk that it will be approved. In the event that the class motion will be approved,the complaint will become a class action which will be heard by the court on its merits. Should this occur, the Company will respond to the classmotion in the time frame ordered by the court. On November 15, 2017 the Company filed its response to the class motion and a motion to dismissthe class motion.On November 15, 2017, the court ordered the respondent (the original plaintiff) to respond to the motion to dismiss within 30 days, which responsewas filed by the respondent on November 29, 2017. On December 28, 2017, the Court ordered that a hearing on the foregoing matter will be heldafter the ruling on the Company’s appeal before the Nasdaq Hearings Panel regarding the delisting of the Company’s securities from the NasdaqCapital Market. On January 25, 2018, Nasdaq concluded that the Company is in compliance with all applicable listing standards and as a result, thescheduled hearing before the Hearings Panel was cancelled and the Company’s common stock continues to trade on the Nasdaq Capital Market.On January 28, 2018, the Company informed the court accordingly. At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedingsregarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before theSupreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable toforeign companies listed both on TASE and on Nasdaq.On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’srecommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which acceptedarguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoidadditional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.Following a hearing regarding the dismissal of the Supreme Court pending cases, a hearing, held on November 19, 2018, the court ordereddismissal of the class action with prejudice. No order for costs was made.d.On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York,County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to bedetermined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also inthe same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answerand asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificatesto North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a thirdparty complaint against theCompany’s CEO and Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Companyfiled a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismissNorth Empire’s thirdparty complaint. The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on theCompany’s motion to dismiss is scheduled for April 16, 2019.The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.F30Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)e.On September 6, 2018, the Company was notified by the Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bidprice requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. NASDAQ Listing Rule5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that afailure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notificationprovided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).f.On January 9, 2014, the Company’s general meeting approved an engagement with one of the investors (as specified in paragraph 1b above) forthe acquisition of rights in a Venture for the accumulation of physical data of human beings by portable electronic devices for the purpose oflocating, based on the accumulated data, articles of clothing in internet apparel stores, which will fit the person whose measurements wereaccumulated.In consideration for the acquisition of the Venture, the Company will undertake to pay the seller 18% of the Company’s operational profit arisingdirectly or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In addition theSeller received an option for a buyback of the Venture upon the occurrence of any one or more of the following: (a) if an application was filed forthe liquidation of the Company or for the appointment of a receiver for the Company’s assets or any material part thereof or for the imposition of alien on a material part of the Company’s assets, which were not revoked within 60 days from the date they were so filed; (b) if by the end of sevenyears from the execution date of the agreement the entire aggregate income of the Company arising directly or indirectly from the Venture or fromthe commercialization of the patent was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. Thebuyback option is valid for 90 days from the occurrence of either one of the above events. The agreed consideration will be determine based on avaluation which will be prepare by an independent assessor.g.The Company entered into a twoyear lease for office space under a noncancelable operating lease agreement and renew it for one more yearexpiring September 2019. The Company is obligated as part of the lease to pay maintenance expenses as well as property taxes and insurancecosts as defined in the agreement. Monthly payments are approximately $9 over the course of the lease term adjusted for changes in the CPI. TheCompany issued a bank guarantee of approximately $63 for the benefit of the lessor.In addition, The Company entered into a threeyears cancelable operating lease agreement for cars.F31Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)Approximate future minimum remaining noncancellable rental payments due under these leases are as follows:Year Ending:2019872020420212Rent expense (excluding taxes, fees and other charges) for the year ended December 31, 2018 totaled approximately $100.h.In November 2015, the Company entered a collaboration agreement with one of Israel’s largest private couriers Katz Deliveries, LTD (“Katz”) underwhich the parties will collaborate to develop an application based on the company’s technology, which will allow the end customer to measure thesize of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaborationagreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior noticeof 14 days.On July 4, 2016, the Company announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’systems.The application uses the Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone overthe package. This information, and the package’s barcode scan, picture and location are sent to the information servers of the Katz company andhelp in its pricing.i.On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in theUnited States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name “Yudovsky”.Under the agreement, the parties will cooperate for the purpose of integrating the company’s measurement technology and computerizedinformation systems of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from thedate the agreement was signed.Upon completion of the integration, a 60day technology testing period will begin, after which, subject to the fulfillment of the technologicalconditions, the agreement will take effect.According to the agreement, the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of$2.5 for maintenance fees and services that the company will provide.F32Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 12 CONTINGENCIES AND COMMITMENTS (Cont.)As the Company successfully completes integration of the technology into LSY’s systems and subject to the limitations set forth in theagreement, the Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca andshearling. The exclusive license will be awarded to LSY as long as the company will have a minimal income from the agreement as follows:1) Minimum income of $1,000 at the end of the first period of 24 months from the effective date, and2) Minimum income of $5,000 at the end of each subsequent year.Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:1) $10 upon signing the agreement.2) $30 upon start of implementation.3) $20 upon completion of implementation and4) $40 balance upon completion of testing and monitoring implementation and the agreement taking effect.As of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded as deferredrevenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue recognition.Yudofsky Fur & Leather Co. postponed the launch of its ecommerce business.The complexity in achieving the correct matching between the fur coat and the human body is still in an experiment stage.Yudofsky and the company are in continuous contact and decided to delay the completion of the integration until further noticeF33Table of ContentsMY SIZE, INC. AND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSU.S. dollars in thousands (except share data and per share data)NOTE 13 MARKETING, GENERAL AND ADMINISTRATIVE EXPENSESDecember 31,20182017Marketing665242Salaries617533Share based payments for consultants, directors and employees9521,558Directors5746Travel243127Rent, office expenses and communication194183Professional services762963Public and investor relations189730Other3913834,0704,765NOTE 14 FINANCIAL INCOME (EXPENSE), NETA. Financial incomeDecember 31,20182017Revaluation of derivative156Exchange rate differences706Revaluation investment in marketable securities123Change in fair value of warrants1,495other281,0131,495B. Financial expenseDecember 31,20182017Revaluation of derivative100Financial expenses from loans192532Change in fair value of warrants1,587Revaluation investment in marketable securities623other28341,8071,289 F34Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREThere were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event asdescribed in Item 304 (a)(1)(v) of Regulation SK.ITEM 9A. CONTROLS AND PROCEDURESDisclosure ControlsWe carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of December 31, 2018. Basedupon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this Annual Report on Form10K, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act, as amended,is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated toour management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financialreporting at December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as ofDecember 31, 2018, our internal control over financial reporting was effective.This Annual Report on Form 10K does not include an attestation report of our registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuersthat are not “large accelerated filers” nor “accelerated filers” under the DoddFrank Wall Street Reform and Consumer Protection Act.Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.36Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and positions of our executive officers and directors.NAMEAge POSITIONEli Walles38Chairman of the BoardRonen Luzon48Chief Executive Officer and DirectorOr Kles36Chief Financial OfficerBilly Pardo43Chief Product OfficerOded Shoshan34Chief Technology OfficerOron Branitzky (1)(2)(3)60DirectorOren Elmaliah (1)(2)(3)35DirectorArik Kaufman (1)(2)(3)38Director(1)Member of our audit committee(2)Member of our nominating and corporate governance committee(3)Member of our compensation committeeThe business background and certain other information about our directors and executive officers is set forth below: Eli Walles has served as our Chairman of the Board since September 2013. From January 2010 until February 2014, Mr. Walles served as the MarketingManager of MS Berlin GMBH, a real estate investment company. We believe that Mr. Walles is qualified to serve as a member of our board of directors because ofhis experience in various transactions and his involvement in the Company’s business since its inception.Ronen Luzon has served as our Chief Executive Officer and a member of our board of directors since September 2013. Since 2006, Ronen Luzon hasadditionally served as Chief Executive Officer and founder of Malers Ltd., a company in the global security solutions market which provides technological solutionsfor integrated communication infrastructures, security and control systems. Prior to Malers, he held several senior marketing, sales management and professionalservices positions in a variety of international high tech companies including VP marketing of GA Tech and Professional Services Manager of Eldat Communication.Mr. Luzon graduated from Middlesex University in London with a B.S. in IT and Business Information Systems. We believe that Mr. Luzon is qualified to serve as amember of our board of directors because of his more than 20 years of experience in the technology sector.Or Kles has served as our Chief Financial Officer since May 2016. He is a certified public accountant with a broad, diverse financial background. From May2013 until April 2016 he served as Assistant Controller of Shikun and BinuiSolel Boneh Infrastructure Ltd. and from December 2010 until May 2013 he served as anAssociate at KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and Accounting (specializing in financing) from The College of ManagementAcademic Studies. Mr. Kles is a certified public accountant in Israel.Billy Pardo has served as our Chief Product Officer since May 2014. From April 2010 until August 2013, Ms. Pardo served as Senior Director of ProductManagement of Fourier Education. Among her areas of expertise are launching products from concept to successful delivery in various methodologies, includingFourier Education’s awardwinning einstein™ Science Tablet. Prior to that Ms. Pardo served in various product management positions including, Project Manager ofTime to Know, Product Marketing Manager of RiT Technologies, Product Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms. Pardo previously served asSoftware Engineer at Eldat Communication Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA from The Interdisciplinary Center and a B.A. inComputer Science from The Academic College of TelAvivYaffo.37Table of ContentsOded Shoshan has served as our Chief Technology Officer since May 2014. Since 2012 Oded Shoshan has served as the founder and Chief ExecutiveOfficer of MonkeyTech Ltd., a company that provides design, development and characterization of mobile applications. Prior to that, Mr. Shoshan served asSoftware Engineer Team Lead of One Technology Pty Ltd and for six years served as a software engineer in the Israel Defense Forces, in the elite Data Center &Information Systems Unit (Mamram) and as an officer in the computer division of the Israeli Air Force. Mr. Shoshan holds a B.A. in Cinema from Tel Aviv University.Oron Branitzky has served as a member of our board of directors since March 2017. Mr. Barnitzky has vast experience in retail technology. SinceNovember 2017, Mr. Branitzky has served as Global Retail Business Development at Superup, and from January 2007 until December 2014 he served as VicePresident of Sales and Marketing at Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing and Sales at Eldat Communication and Sarin TechnologiesLtd. Since January 2015, Mr. Branitzky has served as chairman of the board of directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr. Branitzky servedas an advisory board member of ciValue. Mr. Branitzky received a B.S. from the Hebrew University of Jerusalem and an MBA in International Marketing from TelAviv University. We believe that Mr. Branitzky is qualified to serve as a member of our board of directors because of his more than 20 years of experience inmanaging the sales of hitech solutions to retailers across the globe. Oren Elmaliah, has served as a member of our board of directors since May 2017. In September 2015, Oren Elmaliah founded Accounting Team IL and hasacted as Account Manager since then. Accounting Team IL is a financial consultancy and service provider to public companies traded in Israel and abroad. SinceFebruary 2017, Mr. Elmaliah has served as controller of BioBlast Pharma, and since January 2017 he has served as Chief Financial Officer of Presstek Israel. Inaddition, since September 2015, Mr. Elmaliah has served as an Israel Authorities Reporting Officer of LG Electronics Israel and since September 2015 he has servedas Local Financial Report Consultant of Chiasma. From July 2011 until August 2015, Mr. Elmaliah served as CPA, Financial Director of CFO Director Ltd and fromJune 2010 until July 2011 he served as Risk Management Consultant of RSM International Limited. Mr. Elmaliah holds a B.A in Accounting/Economics and a Msc. inFinance/Accounting from Tel Aviv University, Israel. He is a licensed Certified Public Accountant in Israel. We believe that Mr. Elmaliah is qualified to serve as amember of our board of directors because of his vast finance experience and public company management and administration in the fields of finance, accounting,and financial regulation. Arik Kaufmanhas served as a member of our board of directors since June 2017. Mr. Kaufman is an attorney specializing in the fields of commercial law,corporate law and capital markets and since 2016 runs his own law office in Israel. He has vast experience in the fields of financial reporting and financial regulation.Since September 2017, Mr. Kaufman serves as VP Business Development of Mor Research Applications and since November 2016 he has served as General LegalCounsel of Mor Research Applications. From December 2008 until March 2016, Mr. Kaufman was an attorney at Victor Tshuva and Co. Mr. Kaufman interned atBaratz, Horn and Co. Previously, Mr. Kaufman served as Call Center Shift Manager/Oracle CRM Implementation Team at Comverse Technology, Inc. Since February2018, Mr. Kaufman has served as a director of Ophectra Real Estate & Investments Ltd and, since January 2018, Mr. Kaufman has served as an external director ofTechnoPlus Ventures. In addition, since May 2016 he serves as a director of BGI Investments 1961 Ltd. Mr. Kaufman holds an LLB in Law from the InterdisciplinaryCenter, Herzliya, and is admitted to the Israeli Bar. We believe that Mr. Kaufman is qualified to serve as a member of our board of directors based upon his experienceof assisting with the completion of numerous venture capital financings, mergers, acquisitions, and strategic relationships. In addition, he has served as a member ofthe board of various publicly traded companies, including companies that operate in the same industry as us. Family RelationshipsRonen Luzon, the Chief Executive Officer and a member of our board of directors, and Billy Pardo, the Chief Product Officer, are husband and wife. Thereare no other family relationships among any of our current or former directors or executive officers. 38Table of ContentsInvolvement in Certain Legal ProceedingsWe are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy,insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation SK.Board of DirectorsThere are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders andserves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The board may also appointadditional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly electedand qualified or until his or her earlier resignation or removal. Our board of directors has reviewed the materiality of any relationship that each of our directors haswith us, either directly or indirectly. Based upon this review, we believe that Arik Kaufman, Oren Elmaliach, and Oron Branitzky qualify as independent directors inaccordance with the standards set by the Nasdaq and Rule 10A3 promulgated under the Exchange Act.Committees of the BoardAudit CommitteeOur audit committee, is comprised of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit committee. The auditcommittee is responsible for retaining and overseeing our independent registered public accounting firm, approving the services performed by our independentregistered public accounting firm and reviewing our annual financial statements, accounting policies and our system of internal controls. The audit committee actsunder a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the audit committee’s composition and meetings.The audit committee charter is available on our website www.mysizeid.com. The board of directors has determined that each member of the audit committee is “independent,” as that term is defined by applicable SEC rules. Inaddition, the board of directors has determined that each member of the audit committee is “independent,” as that term is defined by the rules of the Nasdaq StockMarket.The board of directors has determined that Oren Elmaliah is an “audit committee financial expert” serving on its audit committee, and is independent, as theSEC has defined that term in Item 407 of Regulation SK.Compensation CommitteeOur compensation committee consists of Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the compensationcommittee. The compensation committee’s roles and responsibilities include making recommendations to the board of directors regarding the compensation for ourexecutives, the role and performance of our executive officers, and appropriate compensation levels for our CEO, which are determined without the CEO present, andother executives. Our compensation committee also administers our 2017 Equity Incentive Plan and our 2017 Consultant Equity Incentive Plan. The compensationcommittee acts under a written charter, which more specifically sets forth its responsibilities and duties, as well as requirements for the compensation committee’scomposition and meetings. The compensation committee charter is available on our website www.mysizeid.com.Our board of directors has determined that all of the members of the compensation committee are “independent” as that term is defined by the rules of theNasdaq Stock Market.Nominating and Corporate Governance CommitteeThe members of the nominating and corporate governance committee are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman serves aschairman of the corporate governance and nominations committee. The nominating and corporate governance committee acts under a written charter, which morespecifically sets forth its responsibilities and duties, as well as requirements for the nominating and corporate governance committee’s composition and meetings.The nominating and corporate governance committee charter is available on our website www.mysizeid.com. 39Table of ContentsThe nominating and corporate governance committee develops, recommends and oversees implementation of corporate governance principles for us andconsiders recommendations for director nominees. The nominating and corporate governance committee also considers stockholder recommendations for directornominees that are properly received in accordance with applicable rules and regulations of the SEC. Our stockholders that wish to nominate a director for election tothe board of directors should follow the procedures set forth in our bylaws.The nominating and corporate governance committee will consider persons identified by its members, management, stockholders, investment bankers andothers. The guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:●should be accomplished in his or her field and have a reputation, both personal and professional, that is consistent with our image and reputation;●should have relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience andexpertise; and●should be of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assumebroad fiduciary responsibility.The nominating and corporate governance committee will consider a number of qualifications relating to management and leadership experience,background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating and corporategovernance committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to timeand will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board of directors members. The nominating andcorporate governance committee will not distinguish among nominees recommended by stockholders and other persons.Our board of directors has determined that all of the members of the nominating and corporate governance committee are “independent” as that term isdefined by the rules of the Nasdaq Stock Market.Compliance with Section 16(a) of the Securities Exchange Act of 1934Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equitysecurities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directorsand greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely upon a review of Forms 3, 4, and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that thedirectors, executive officers, and greater than 10% beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31,2018, except as follows: (i) our directors, Arik Kaufman, Oren Elmaliah and Oron Braniztky, each filed one late Form 4 with respect to a grant of options that we madeto them, and (ii) Israel Levy, who may have been a former 10% beneficial owner, filed one late Form 4 with respect to a sale of our shares. Code of Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to all our employees. The text of the Code of Business Conduct and Ethics is publiclyavailable on our website at www.mysizeid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this report andis not incorporated by reference herein. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to ourdirectors, principal executive and financial officers will be posted on the “InvestorsCorporate Governance” section of our website at www.mysizeid.com or will beincluded in a Current Report on Form 8K, which we will file within four business days following the date of the amendment or waiver.Change in Procedures for Recommending DirectorsThere have been no material changes to the procedures by which our stockholders may recommend nominees to our board of directors from thoseprocedures set forth in our Proxy Statement for our 2018 Annual Meeting of Stockholders, filed with the SEC on May 18, 2018.40Table of ContentsITEM 11. EXECUTIVE COMPENSATIONSummary Compensation TableThe following sets forth the compensation paid by us to our named executive officers, during the years ended December 31, 2018 and December 31, 2017.Name and Principal PositionYearSalary($) (1)Bonus($)StockAwards($)OptionAwards($) (2)All OtherCompensation($)Total($)Eli Walles2018117,00019,000 37,00056,000229,000Chairman of the Board2017117,00066,00057,000240,000Ronen Luzon2018145,00044,00018,00078,000285,000Chief Executive Officer2017133,00031,00049,000213,000Or Kles201889,00021,00014,00036,000160,000Chief Financial Officer201783,00013,00035,000131,000Billy Pardo2018125,00019,00018,00050,000213,000Chief Product Officer2017117,00031,00038,000186,000(1)Salary for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the named executive officers during 2018 and 2017, computed inaccordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the named executiveofficers. The assumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year endedDecember 31, 2018.All Other Compensation TableThe “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:NameYearAutomobileRelatedExpenses($)Manager’sInsurance*($)EducationFund*($)Other socialbenefits**($)Total($)Eli Walles201811,00021,00011,00013,00056,000201711,00017,0009,00020,00057,000201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)201711,00017,0009,00020,00057,000Ronen Luzon201824,00026,00011,00012,00073,000201716,00018,0008,0007,00049,000Or Kles20186,00013,0007,00010,00036,00020176,00012,0006,00010,00034,000Billy Pardo20182,00026,00012,00010,00050,00020176,00016,0008,0008,00038,000*Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination ofseverance savings (in accordance with Israeli law), defined contribution taxqualified pension savings and disability insurance premiums. An educationfund is a savings fund of pretax contributions to be used after a specified period of time for educational or other permitted purposes.**Other social benefits for 2018 and 2017 for all named individuals includes tax payments in respect of social benefits, and additionally in 2018, for each ofRonen Luzon and Billy Pardo, includes a sum of $5,000 for travel related expenses.41Table of ContentsAgreements with Named Executive OfficersEli WallesOn November 18, 2018, My Size Israel 2014 Ltd., or My Size Israel entered into an employment agreement with Eliyahu Walles, or the Walles EmploymentAgreement, pursuant to which Mr. Walles will serve as our Chairman of the board of directors. Pursuant to the terms of the Walles Employment Agreement, Mr.Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Walles shall be entitledto social benefits and other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurancecoverage, including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Walles EmploymentAgreement and subject to certain conditions, payments made by us to the pension fund or the manager’s insurance fund shall be made in lieu of severancepayments due to Mr. Walles. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either partyprovides written notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Walles’ employment withoutprior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement).Ronen LuzonOn November 18, 2018, My Size Israel, our whollyowned subsidiary, entered into an employment agreement with Ronen Luzon, or the Luzon EmploymentAgreement, pursuant to which Mr. Luzon will serve as our Chief Executive Officer. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shallreceive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by us. In addition, Mr. Luzon shall be entitled socialbenefits and to other benefits, including, but not limited to, contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage,including insurance in case of disability, annual vacation days, sick leave and expense reimbursement. Pursuant to the terms of the Luzon Employment Agreementand subject to certain conditions, payments made by the Company to the pension fund or manager’s insurance fund shall be made in lieu of severance paymentsdue to Mr. Luzon. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provideswritten notice to the other party at least 75 days in advance of the termination of such agreement. We may also terminate Mr. Luzon’s employment without priorwritten notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement).Or KlesOn November 18, 2018, My Size Israel entered into an employment agreement with Or Kles, or the Kles Employment Agreement, pursuant to which Mr. Kleswill serve as our Chief Financial Officer. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary andshall be eligible to receive such bonus as determined by us. In addition, Mr. Kles shall be entitled to social benefits and other benefits, including, but not limited to,contributions towards an education fund, pension scheme, manager’s insurance, insurance coverage, including insurance in case of disability, annual vacation days,sick leave and expense reimbursement. Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by us to thepension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Mr. Kles. The term of the Kles Employment Agreement shall beeffective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of thetermination of such agreement. We may also terminate Mr. Kles’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined inthe Kles Employment Agreement).42Table of ContentsBilly PardoOn November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo, or the Pardo Employment Agreement, pursuant to which Ms.Pardo will serve as our Chief Product Officer. Pursuant to the terms of the Pardo Employment Agreement, Ms. Pardo shall receive NIS 40,000 per month as her basesalary and shall be eligible to receive such bonus as determined by us. In addition, Ms. Pardo shall be entitled to social benefits and other benefits, including, butnot limited to, contributions towards an education fund, pension scheme, manager’s insurance ,insurance coverage, including insurance in case of disability, annualvacation days, sick leave and expense reimbursement. Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments madeby us to the pension fund or the manager’s insurance fund shall be made in lieu of severance payments due to Ms. Pardo. The term of the Pardo EmploymentAgreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days inadvance of the termination of such agreement. We may also terminate Ms. Pardo’s employment without prior written notice (or payment in lieu of such notice) forCause (as defined in the Pardo Employment Agreement).Outstanding Equity Awards at Fiscal YearEndThe following table provides information regarding options held by each of our named executive officers that were outstanding as of December 31, 2018.Option AwardsName and Principal PositionNumber ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisableOptionExercisePriceOptionExpirationDateEli Walles – Chairman of the Board300,000(1)$1.217/24/2022Ronen Luzon Chief Executive Officer150,000(1)$1.217/24/2022Or Kles – Chief Financial Officer56,666(2)28,334(2)$1.217/24/2022Billy Pardo Chief Product Officer150,000(1)$1.217/24/2022(1)The option has a grant date of July 24, 2017 and vested in full on January 24, 2018.(2)The option has a grant date of July 24, 2017. 28,334 options vested immediately upon grant, 28,333 options vested on May 1, 2018 and as the remaining28,333 options will vest on May 1, 2019.43Table of ContentsDirector CompensationThe following table sets forth compensation information for our nonemployee directors for the year ended December 31, 2018.NameFees earned orpaid incash ($)(1)Optionawards($)(1)Total($)Oren Elmalih17,0074,81921,826Oron Barnitzky20,3244,81925,143Arik Kaufman16,8284,81921,647(1)Fees for the years 2018 and 2017 are based on average US$/NIS representative exchange rates of NIS3.6.(2)Amounts in this column represent the grant date fair value of options granted to the nonemployee directors during 2018, computed in accordance withFASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the nonemployee directors. Theassumptions made in valuing the options reported in this column are discussed in Note 10 to our financial statements for the year ended December 31, 2018.We compensate our nonemployee directors for their service as a member of our board. Mr. Walles and Mr. Luzon receive no separate compensation forboard service. Mr. Walles’s and Mr. Luzon’s compensation is set forth above in the Summary Compensation Table.Each nonemployee director is entitled to receive a per meeting fee of $286. Nonemployee directors are also reimbursed for their travel and reasonable outofpocket expenses incurred in connection with attending board and committee meetings, to the extent that attendance is required by the board or the committee(s)on which that director serves.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Holders and ManagementThe following table sets forth certain information regarding beneficial ownership of shares of our common stock as of March 1, 2019 by (i) each personknown to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directorsand executive officers as a group. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to allshares beneficially owned, subject to community property laws, where applicable.Beneficial Owner(1)Shares ofCommonStockBeneficiallyOwnedPercentage(2)5% Holder:Shoshana Zigdon3,500,00011.7%Executive officers and directors:Eliyahu Walles300,000(3)1.0%Ronen Luzon2,055,950(4)6.8%Or Kles85,000(5)*Billy Pardo2,055,950(6)6.8%Oded Shoshan45,000(7)*Arik Kaufman10,000(8)*Oren Elmaliah10,000(9)*Oron Branitzky10,000(10)*All Executive Officers and Directors as a Group (8 persons)2,515,9508.4%*Less than 1%(1)The address of each person is c/o My Size, Inc., 3 Arava St., POB 1026, Airport City, Israel 7010000 unless otherwise indicated herein.44Table of Contents(2)The calculation in this column is based upon 29,852,389 shares of common stock outstanding on March 1, 2019. Beneficial ownership is determined inaccordance with the rules of the SEC and generally includes voting or investment power with respect to the subject securities. Shares of common stock thatare currently exercisable or exercisable within 60 days of March 1, 2019 are deemed to be beneficially owned by the person holding such securities for thepurpose of computing the percentage beneficial ownership of such person, but are not treated as outstanding for the purpose of computing the percentagebeneficial ownership of any other person.(3)Consists of options to purchase up to 300,000 shares of our common stock.(4)Consists of (i) 1,755,950 shares of common stock, (ii) options to purchase up to 150,000 shares of our common stock, and (iii) options to purchase up to150,000 shares of our common stock which are held by Billy Pardo, Ronen Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the securities ofus held by Ms. Pardo.(5)Consists of an option to purchase 85,000 shares of our common stock.(6)Consists of (i) options to purchase up to 150,000 shares of the Company’s common stock, (ii) 1,755,950 shares of common stock which are held by RonenLuzon, Billy Pardo’s spouse, and (iii) options to purchase up to 150,000 shares of our common stock which are held by Ronen Luzon, Billy Pardo’s spouse.Ms. Pardo may be deemed to beneficially hold the securities of the Company held by Mr. Luzon.(7)Consists of options to purchase up to 45,000 shares of our common stock.(8)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(9)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.(10)Consists of options to purchase up to 10,000 shares of our common stock. Excludes an option to purchase up to 10,000 shares of our common stock whichwill vest in full on September 6, 2019.Change in ControlWe are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including anypledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.Securities Authorized for Issuance Under Equity Compensation PlansOn January 29, 2017, our board of directors approved the 2017 Equity Incentive Plan and the 2017 Consultant Equity Incentive Plan, which were approvedby our stockholders on March 21, 2017. In addition, on January 29, 2017, our board of directors approved the Stock Option Plan Israel Grantees SubPlan. The 2017Equity Incentive Plan initially authorized the issuance of up to 2,000,000 shares of common stock under the plan and the 2017 Consultant Equity Incentive Planinitially authorized the issuance of up to 3,000,000 shares of common stock under the plan. On February 12, 2018, our stockholders approved an amendment to the2017 Consultant Equity Incentive Plan to increase the maximum number of shares of our common stock available for issuance under the plan from 3,000,000 to4,500,000. On July 3, 2018, our stockholders approved an amendment to the 2017 Equity Incentive Plan to increase the maximum number of shares of our commonstock available for issuance under the plan from 2,000,000 to 3,000,000 and an amendment to the 2017 Consultant Equity Incentive Plan to increase the maximumnumber of shares of our common stock available for issuance under the plan from 4,500,000 to 7,000,000.The following table summarizes information about our equity compensation plans and individual compensation arrangements as of December 31, 2018. Number of securities to be issued upon exerciseof outstandingoptions, warrants andrights(a)Weighted averageexercise price of outstanding options, warrants and rights (b)Number of securities remainingavailable for future issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a) (c)Equity compensation plans approved by security holders1,580,0001.138,393,334Equity compensation plans not approved by security holders1,020,0004.186Total2,600,0002.338,393,33445Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEDuring years ended December 31, 2018 and 2017, except for compensation arrangements described elsewhere herein, we did not participate in anytransaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of$120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors,officers, five percent beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect materialinterest.Compensation arrangements for our named executive officers and directors are described in the section entitled “Executive Compensation.”MonkeytechOur Chief Technology Officer, Oded Shoshan, is compensated pursuant to a technology consulting agreement between the Company and Monkeytech Ltd.Mr. Shoshan is the chief executive officer and owner of Monkeytech Ltd. Mr. Shoshan owns less than 50% of Monkeytech Ltd. In 2018 and 2017, we paidMonkeytech, Ltd. approximately $164,000 and $84,000, respectively in consulting fees. In addition, as disclosed in Item 12 above, in 2017, Mr. Shoshan was grantedoptions to purchase 45,000 shares of our common stock.Indemnification Agreements and Directors’ and Officers’ Liability InsuranceWe have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us toindemnify these individuals and, in certain cases, affiliates of such individuals, to the fullest extent permitted by Delaware law against liabilities that may arise byreason of their service to us or at our direction, and to advance expenses incurred as a result of any proceedings against them as to which they could beindemnified. We also maintain an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicablesecurities laws.Director IndependenceSee “Item 10. Directors, Executive Officers and Corporate Governance; Corporate Governance, Board Composition” above for a discussion regarding theindependence of the members of our board of directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table sets forth the aggregate fees billed by Somekh Chaikin, a member firm of KPMG International as described below:Fee Category20182017Audit Fees95,21391,220AuditRelated FeesTax Fees9,30021,222All Other Fees10,0007,000Total Fees114,513119,442Audit Fees: Audit Fees consist of fees billed for professional services performed by Somekh Chaikin for the audit of our annual financial statements, thereview of interim consolidated financial statements, and related services that are normally provided in connection with registration statements, including theregistration statement for S1 and S3.Tax Fees: Tax Fees may consist of fees for professional services, including tax consulting and compliance performed by an independent registered publicaccounting firm.All Other Fees: All Other Fees for 2018 consist of professional services for a transfer pricing study and for 2017 consist of professional services withrespect to government grants.PreApproval Policies and ProceduresIn accordance with the SarbanesOxley Act of 2002, as amended, our audit committee charter requires the audit committee to preapprove all audit andpermitted nonaudit services provided by our independent registered public accounting firm, including the review and approval in advance of our independentregistered public accounting firm’s annual engagement letter and the proposed fees contained therein. The audit committee has the ability to delegate the authorityto preapprove nonaudit services to one or more designated members of the audit committee. If such authority is delegated, such delegated members of the auditcommittee must report to the full audit committee at the next audit committee meeting all items preapproved by such delegated members. In the fiscal years endedDecember 31, 2018 and December 31, 2017 all of the services performed by our independent registered public accounting firm were preapproved by the auditcommittee. 46Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Financial StatementsThe financial statements required by this Item are included beginning at page F1.(b)ExhibitsSee Exhibit IndexITEM 16. FORM 10K SUMMARYNot applicable EXHIBIT INDEXExhibitNumberDescription3.1Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Form onForm 8K filed on March 23, 2017)3.2Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10K filed onMarch 4, 2016)3.3Amendment to Amended and Restated Certificate of Incorporation of My Size, Inc. (incorporated by reference to the Company’s Current Report onForm 8K filed on February 20, 2018)3.4Second Amended and Restated ByLaws of My Size, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8Kfiled on April 24, 2018)4.1Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S3/A filed onNovember 14, 2016)4.2Form of Warrant to Purchase Common Stock issued on December 22, 2017 (incorporated by reference to Exhibit 4.3 to the Company’s RegistrationStatement on Form S1/A filed on December 18, 2017)4.3*Form of Warrant to Purchase Common Stock issued on February 2, 201810.1My Size, Inc. 2017 Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement on Schedule DEF 14Afiled on March 2, 2017)10.2My Size, Inc. 2017 Consultant Equity Incentive Plan (incorporated by reference as an exhibit to the Company’s Definitive Proxy Statement onSchedule DEF 14A filed on March 2, 2017)10.3*My Size, Inc. 2017 Stock Option Plan Israel Grantees SubPlan10.4Form of Securities Purchase Agreement (incorporated by reference as Exhibit 99.1 to the Company’s Registration Statement on Form S3 filed onSeptember 20, 2016)10.5Form of Warrant (incorporated by reference as Exhibit 99.3 to the Company’s Registration Statement on Form S3 filed on September 20, 2016)10.6Cooperation Agreement between My Size and In Situ S.A. dated as of November 7, 2014 (incorporated by reference to Exhibit 10.1 to the Company’sAnnual Report on Form 10K filed on March 4, 2016)10.7Purchase Agreement between My Size, Inc. and Shoshana Zigdon dated as of February 16, 2014 (incorporated by reference to Exhibit 10.2 to theCompany’s Annual Report on Form 10K filed on March 4, 2016)10.8Contract for Services Regarding the Preparation of Public Funding Applications between My Size, Inc. and PNO Polska Sp. z o.o. dated as ofFebruary 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10K filed on April 14, 2017)10.9Form of Securities Purchase Agreement dated February 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statementon Form S3 filed on March 3, 2017)10.10Warrant issued to Longside Ventures LLC dated February 22, 2017 (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S3 filed on March 3, 2017)47Table of ContentsExhibitNumberDescription10.11Technology and License Agreement dated as of March 4, 2016 between My Size, Inc. and LSY International, Inc. (incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8K filed on March 7, 2016).10.12Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on August 22, 2017)10.13Form of Securities Purchase Agreement dated August 16, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form8K filed on August 22, 2017)10.14Form of Securities Purchase Agreement dated October 26, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8K filed on October 27, 2017)10.15Form of Warrant issued October 30, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on October27, 2017)10.16Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S1/A filed onDecember 19, 2017)10.17Form of Placement Agency Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8K filed on December 20,2017)10.18Form of LeakOut Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on December 20, 2017)10.19Form of Placement Agency Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8K filed on February 1,2018)10.20Form of LeakOut Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.21Form of LockUp Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8K filed on February 1, 2018)10.22 +Employment Agreement between My Size Israel 2014 Ltd. and Ronen Luzon dated November 18, 2018 (incorporated by reference to Exhibit 10.1 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)10.23 +Employment Agreement between My Size Israel 2014 Ltd. and Or Kles dated November 18, 2018 (incorporated by reference to Exhibit 10.2 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.24 +Employment Agreement between My Size Israel 2014 Ltd. and Billy Pardo dated November 18, 2018 (incorporated by reference to Exhibit 10.3 to theCompany’s Quarterly Report on Form 10Q filed on November 19, 2018)10.25 +Employment Agreement between My Size Israel 2014 Ltd. and Eliyahu Walles dated November 18, 2018 (incorporated by reference to Exhibit 10.4 tothe Company’s Quarterly Report on Form 10Q filed on November 19, 2018)21.1List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10K filed on March 21, 2018)23.1*Consent of Somekh Chaikin31.1*Certification of the Chief Executive Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200231.2*Certification of the Chief Financial Officer pursuant to Rule 13a14(a) of the Exchange Act, as adopted pursuant to Section 302 of the SarbanesOxley Act of 200232.1*Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a14(b) of the Exchange Act and 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the SarbanesOxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Schema101.CAL*XBRL Taxonomy Calculation Linkbase101.DEF*XBRL Taxonomy Definition Linkbase101.LAB*XBRL Taxonomy Label Linkbase101.PRE*XBRL Taxonomy Presentation Linkbase* Filed herewith.+ Indicates a management contract or any compensatory plan, contract or arrangement48Table of ContentsSIGNATURESPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2019.MY SIZE, INC./s/ Ronen LuzonRonen LuzonChief Executive Officer (Principle Executive Officer) /s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10K has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.SignatureTitleDate/s/ Ronen LuzonChief Executive Officer and DirectorMarch 27, 2019Ronen Luzon(Principle Executive Officer)/s/ Or KlesChief Financial OfficerMarch 27, 2019Or Kles(Principal Financial and Accounting Officer)/s/ Eli WallesChairman of the Board of DirectorsMarch 27, 2019Eli Walles/s/ Oren ElmaliahDirectorMarch 27, 2019Oren Elmaliah/s/ Arik KaufmanDirectorMarch 27, 2019Arik Kaufman/s/ Oron BranitzkyDirectorMarch 27, 2019Oron Branitzky49EX4.3 2 f10k2018ex43_mysize.htm FORM OF WARRANT TO PURCHASE COMMON STOCK ISSUED ON FEBRUARY 2, 2018Exhibit 4.3THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTHON THE FACE HEREOF PURSUANT TO SECTION1(a) OF THIS WARRANT.MY SIZE, INC.WARRANT TO PURCHASE COMMON STOCKWarrant No.: [ ]Date of Issuance: February 2, 2018 (“Issuance Date”)My Size, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchasefrom the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants toPurchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59p.m., New York time, on the Expiration Date (as defined below), February 2, 2023 (subject to adjustment as provided herein) fully paid and nonassessable shares ofCommon Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein,capitalized terms in this Warrant shall have the meanings set forth in Section 17. This Warrant is one of the Warrants to Purchase Common Stock (the “RegisteredWarrants”) issued pursuant to (i) Section 1 of that certain Securities Purchase Agreement, dated as of January 31, 2018 (the “Subscription Date”), by and amongthe Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”) and (ii) the Company’sRegistration Statement on Form S3 (File number 333222535) (the “Registration Statement”).PREPAYMENT OF NOMINAL VALUE. Notwithstanding anything herein to the contrary, the Company hereby acknowledges receipt of the nominal valueof $0.001 per Warrant Share from the initial holder of this Warrant as of the initial Issuance Date, which was prefunded to the Company on or prior to the initialIssuance Date (as adjusted for stock splits, stock dividends, recapitalizations and similar events, the “Nominal Per Share Amount”, and such prepayment, the“Prepayment”). Consequently, upon each exercise of this Warrant, the applicable Aggregate Exercise Price (as defined below) of this Warrant (less the applicableNominal Per Share Amount) shall be the only remaining unpaid amount that must be satisfied by the Holder (whether in cash or by a Cashless Exercise (as definedbelow)) to effect an exercise of this Warrant. The Prepayment is nonrefundable, whether or not this Warrant is exercisable in full.1. EXERCISE OF WARRANT.(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrantmay be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via facsimile or otherwise) ofa written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Dayfollowing an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date ofsuch exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer ofimmediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (asdefined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of anExercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a newWarrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the thenremaining WarrantShares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On orbefore the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile or electronicmail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent(the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the termsherein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as requiredpursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), theCompany shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, uponthe request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or itsdesignee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FastAutomated Securities Transfer Program, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the ExerciseNotice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant tosuch exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shareswith respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of deliveryof the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a)and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exerciseand upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event laterthan two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance withSection 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number ofWarrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but ratherthe number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuanceand similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance anddelivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly madepursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of theapplicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of suchWarrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of aCashless Exercise) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. From the Issuance Date through and includingthe Expiration Date, the Company shall maintain a transfer agent that participates in the DTC’s Fast Automated Securities Transfer Program.2(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.649, subject to adjustment as provided herein.(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either(I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificatefor the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent isparticipating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for suchnumber of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if the Registration Statement (orprospectus contained therein) covering the issuance of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is notavailable for the issuance of such Unavailable Warrant Shares and the Company fails to promptly (x) so notify the Holder and (y) deliver the Warrant Shareselectronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to theHolder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause(II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all otherremedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure anamount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and towhich the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the periodbeginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void itsExercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such ExerciseNotice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate andregister such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities TransferProgram, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock towhich the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failureoccurs, and if on or after such Share Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to allor any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not receivedfrom the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “BuyIn”), then, in addition to all other remedies available to theHolder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amountequal to the Holder’s total purchase price (including brokerage commissions and other outofpocket expenses, if any) for the shares of Common Stock so purchased(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “BuyIn Price”), at which point the Company’s obligation to so issueand deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, withDTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares)shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit thebalance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon theHolder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the BuyIn Price over the product of (A)such number of Warrant Shares multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the dateof the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “BuyIn Payment Amount”). Nothing shall limit theHolder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/orinjunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares ofCommon Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transferagent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, (i) if the Company fails to deliver the applicablenumber of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind suchexercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to suchExercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date ofsuch notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resaleof the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares and the Holder hassubmitted an Exercise Notice prior to receiving notice of the nonavailability of such registration statement and the Company has not already delivered the WarrantShares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder isentitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holdershall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be,any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect theCompany’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some orall of such Exercise Notice from a cash exercise to a Cashless Exercise.3(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof theRegistration Statement is not effective (or the prospectus contained therein is not available for use) for the issuance of all of the Warrant Shares, then the Holdermay, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company uponsuch exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according tothe following formula (a “Cashless Exercise”):Net Number = (A x B) (A x C)DFor purposes of the foregoing formula:A= the total number of shares with respect to which this Warrant is then being exercised.B = the greater of (A) the Spot Price and (B) the quotient of (x) the sum of the VWAP of the Common Stock of each of the twenty (20) TradingDays ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,divided by (y) twenty (20).C = the difference of (x) the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise less the Nominal Per ShareAmount.D = the Spot Price.For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued ina Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on thedate this Warrant was originally issued pursuant to the Securities Purchase Agreement.(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issuedpursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute inaccordance with Section 13.4(f) Limitations on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise anyportion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extentthat after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “MaximumPercentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregatenumber of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held bythe Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which thedetermination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercisedportion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconvertedportion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including otherRegistered Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitationcontained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. Forpurposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding theMaximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report onForm 10K, Quarterly Report on Form 10Q, Current Report on Form 8K or other public filing with the SEC, as the case may be, (y) a more recent publicannouncement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stockoutstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number ofoutstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number ofshares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determinedpursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquiredpursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, theCompany shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request ofthe Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stockthen outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securitiesof the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number wasreported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other AttributionParties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (asdetermined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficialownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have thepower to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, theCompany shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder mayfrom time to time increase (with such increase not effective until the sixtyfirst (61st) day after delivery of such notice) or decrease the Maximum Percentage to anyother percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until thesixtyfirst (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other AttributionParties and not to any other holder of Registered Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stockissuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purposeincluding for purposes of Section 13(d) or Rule 16a1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effecton the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall beconstrued and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or anyportion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changesor supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to asuccessor holder of this Warrant.5(g) Reservation of Shares.(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under thisWarrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfythe Company’s obligation to issue shares of Common Stock under the Registered Warrants then outstanding (without regard to any limitations on exercise)(the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) bereduced other than proportionally in connection with any exercise or redemption of Registered Warrants or such other event covered by Section 2(a) below.The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among theholders of the Registered Warrants based on number of shares of Common Stock issuable upon exercise of Registered Warrants held by each holder on theClosing Date (as defined in the Securities Purchase Agreement) (without regard to any limitations on exercise) or increase in the number of reserved shares,as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s RegisteredWarrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved andallocated to any Person which ceases to hold any Registered Warrants shall be allocated to the remaining holders of Registered Warrants, pro rata basedon the number of shares of Common Stock issuable upon exercise of the Registered Warrants then held by such holders (without regard to any limitationson exercise).6(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time while any of the RegisteredWarrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy itsobligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary toincrease the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for allthe Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrenceof an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, theCompany shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase inauthorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the eventthat the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficientshares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the“Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for thecancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) suchnumber of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing onthe date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date ofsuch issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any BuyIn Payment Amount, brokerage commissions andother outofpocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g)(ii) shall limit any obligations ofthe Company under any provision of the Securities Purchase Agreement.72. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.So long as the Warrant remains outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 2.(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after theSubscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any classof capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes ofits then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classesof its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of whichthe numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number ofshares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effectiveimmediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or(iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under thisparagraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflectsuch event.(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company issues or sells, or inaccordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned orheld by or for the account of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration pershare (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (suchExercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, theExercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation,determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of CommonStock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable uponexercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. Forpurposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any suchOptions or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to theterms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company withrespect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise orexchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price setforth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exerciseof any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwisepursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or saleof such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of suchOption or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder ofsuch Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance ofsuch shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actualissuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.8(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share forwhich one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof isless than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company atthe time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per sharefor which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof”shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to oneshare of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security orotherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock isissuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to theterms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale ofsuch Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such ConvertibleSecurity (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of suchshares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any suchissuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be madepursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of suchissuance or sale.9(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, ifany, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertibleinto or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion orexercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decreaseshall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increasedor decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued orsold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are increasedor decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stockdeemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. Noadjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with theissuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Optionand/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), togethercomprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to bethe lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for whichone share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Section 2(b)(i) or 2(b)(ii)above and (z) the lowest VWAP of the Common Stock on any Trading Day during the four Trading Day period immediately following the publicannouncement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Marketon a Trading Day, such Trading Day shall be the first Trading Day in such four Trading Day period). If any shares of Common Stock, Options orConvertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the netamount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for aconsideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where suchconsideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be thearithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of CommonStock, Options or Convertible Securities are issued to the owners of the nonsurviving entity in connection with any merger in which the Company is thesurviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the nonsurviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair market value of anyconsideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reachagreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair market value of such consideration willbe determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selectedby the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees andexpenses of such appraiser shall be borne by the Company.10(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive adividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares ofCommon Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of CommonStock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting ofsuch right of subscription or purchase (as the case may be).(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 2(a), the number of Warrant Shares that maybe purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payablehereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regardto any limitations on exercise contained herein).(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. Notwithstanding the other provisions ofthis Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (anysuch securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable orexercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or morereset(s) to a fixed price, but exclusive of such formulations reflecting customary antidilution provisions (such as share splits, share combinations, share dividendsand similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide writtennotice thereof via facsimile and overnight courier to the Holder on the date of such agreement and the issuance of such Convertible Securities or Options. From andafter the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its solediscretion to substitute the Variable Price for the Exercise Price upon exercise of this Warrant by designating in the Exercise Notice delivered upon any exercise ofthis Warrant that solely for purposes of such exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder’s election torely on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.(e) Other Events. In the event that the Company (or any Subsidiary (as defined in the Securities Purchase Agreement)) shall take any action to which theprovisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplatedby the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights,phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriateadjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustmentpursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, providedfurther that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board ofdirectors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments,whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.11(f) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the dispositionof any such shares shall be considered an issuance or sale of Common Stock.(g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant, with the prior approval of the Principal Market andthe prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce the then current Exercise Price to any amount and forany period of time deemed appropriate by the board of directors of the Company.3. RIGHTS UPON DISTRIBUTION OF ASSETS.In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquireits assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or othersecurities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme ofarrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled toparticipate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stockacquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, theMaximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the recordholders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right toparticipate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not beentitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of CommonStock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance forthe benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on anysubsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).124. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options,Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “PurchaseRights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations orrestrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined forthe grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right wouldresult in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Rightto the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (andbeneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder for a period ofup to six (6) months, until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the MaximumPercentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on anysubsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes inwriting all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) inaccordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holderprior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by awritten instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number ofshares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on theexercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrantimmediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporationwhose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shallsucceed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the otherTransaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shallassume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had beennamed as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shallbe issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (orother securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter))issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of theSuccessor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transactionhad this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), asadjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its soleoption, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. Inaddition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of sharesof Common Stock are entitled to receive stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscriptionrights) (the “Corporate Event Consideration”) with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall makeappropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of theapplicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock or Corporate Event Consideration (except such itemsstill issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter) issuable upon the exercise of the Warrant prior to such FundamentalTransaction, such Corporate Event Consideration which the Holder would have been entitled to receive upon the happening of the applicable FundamentalTransaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of thisWarrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.13(c) Change of Control Rights. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any timecommencing on the earliest to occur of (A) the public disclosure of any Change of Control, (B) the consummation of any Change of Control and (C) the Holder firstbecoming aware of any Change of Control through the date that is ninety (90) days after the public disclosure of the consummation of such Change of Control bythe Company pursuant to a Current Report on Form 8K filed with the SEC, the Company or the Successor Entity (as the case may be) shall exchange this Warrantfor the Black Scholes Value of such portion of this Warrant (less the applicable Nominal Per Share Amount, which is not refundable hereunder) subject to exchange(collectively, the “Aggregate Black Scholes Value”) in cash; provided, however, that if the Change of Control is not within the Company’s control, including notapproved by the Company’s Board of Directors, the Holder shall only be entitled to receive the Aggregate Black Scholes Value in the form of, at the Company’selection (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownershiplimitation in the form of Section 1(f) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement of theHolder to pay any additional consideration, at the option of the Holder, into such aggregate amount of Corporate Event Consideration applicable to such Change ofControl equal in value to the Aggregate Black Scholes Value (as determined in accordance with Section 2(b)(iv) above), but with the aggregate number of SuccessorShares (as defined below) (on an asconverted or asexercised basis, with respect to any Convertible Securities or Options included in such Corporate EventConsideration) issuable upon conversion of the Rights to be determined in increments of 10% of the portion of the Aggregate Black Scholes Value attributable tosuch Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respectto the first Successor Share Value Increment determined based on 95% of the Closing Bid Price of the Successor Shares on the date the Rights are issued and oneach of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall bedetermined based upon a Successor Share Value Increment at 95% of the Closing Bid Price of the Successor Shares in effect for such corresponding Trading Day(such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that theCompany shall not consummate a Change of Control if (x) the Corporate Event Consideration includes share capital or other equity interest (the “SuccessorShares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of thetwenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to theHolder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on thedate of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing BidPrice on the Trading Day ended immediately prior to the time of consummation of the Change of Control) and (y) the Company shall not have properly elected inaccordance with this Section 4(c) to pay the applicable Black Scholes Value to the Holder in cash. The Company shall give the Holder written notice of eachConsideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of theRights, as applicable, shall be made by the Company (or at the Company’s direction) to the Holder on the later of (x) the second (2nd) Trading Day after the date ofsuch request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares ofCommon Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate EventConsideration included in the Right, if any, pursuant to this Section 4(c) is pari passu with the Corporate Event Consideration to be paid to holders of shares ofCommon Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior tosuch time delivering the Right to the Holder hereunder.(d) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shallbe applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant(provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registeredunder the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).145. NONCIRCUMVENTION.The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities PurchaseAgreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme ofarrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms ofthis Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise ofthis Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly andlegally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after thesixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant torestrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining suchconsents or approvals as necessary to permit such exercise into shares of Common Stock.6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or bedeemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely inits capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividendsor subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of thisWarrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of thisWarrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstandingthis Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally,contemporaneously with the giving thereof to the stockholders.157. REISSUANCE OF WARRANTS.(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwithissue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right topurchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is beingtransferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss,theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, uponsurrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing theright to purchase the Warrant Shares then underlying this Warrant.(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for anew Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying thisWarrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of suchsurrender; provided, however, no warrants for fractional shares of Common Stock shall be given.(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shallbe of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying thisWarrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added tothe number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Sharesthen underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shallhave the same rights and conditions as this Warrant.8. NOTICES.Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of theSecurities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than theissuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reasontherefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the ExercisePrice and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior tothe date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) withrespect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders ofshares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Daysprior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, nonpublicinformation regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall simultaneously file such noticewith the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8K. If the Company or any of its Subsidiaries providesmaterial nonpublic information to the Holder that is not simultaneously filed in a Current Report on Form 8K and the Holder has not agreed to receive such materialnonpublic information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of itsSubsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basisof, such material nonpublic information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall bedefinitive and may not be disputed or challenged by the Company.169. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action hereinprohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall beeffective unless it is in writing and signed by an authorized representative of the waiving party.10. SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision thatwould otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and theinvalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modifiedcontinues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity orunenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practicalrealization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalidor unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceableprovision(s).1711. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation andperformance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provisionor rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of NewYork. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing acopy thereof to the Company at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall constitute good andsufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in TheCity of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding isimproper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall bedeemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’sobligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTIONCONTEMPLATED HEREBY.12. CONSTRUCTION; HEADINGS.This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. Theheadings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant butdefined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement)in such other Transaction Documents unless otherwise consented to in writing by the Holder.13. DISPUTE RESOLUTION.(a) Submission to Dispute Resolution.(i) In the case of a dispute relating to the Exercise Price, the Closing Sale Price, the Bid Price, Black Scholes Value or fair market value or thearithmetic calculation of the number of Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any ofthe foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two(2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of thecircumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price, suchClosing Sale Price, such Bid Price, such Black Scholes Value or such fair market value or such arithmetic calculation of the number of Warrant Shares (as thecase may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of suchdispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank toresolve such dispute.18(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered inaccordance with the first sentence of this Section 13 and (B) written documentation supporting its position with respect to such dispute, in each case, nolater than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the“Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the“Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required DisputeDocumentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer beentitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to suchdispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investmentbank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested bysuch investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to suchinvestment bank in connection with such dispute (other than the Required Dispute Documentation).(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and theHolder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of suchinvestment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all partiesabsent manifest error.(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 13 constitutes an agreement to arbitrate between the Companyand the Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”)and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13, (ii) adispute relating to the Exercise Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stockoccurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or saleor deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument,security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each otherapplicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall beentitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by suchinvestment bank in connection with its resolution of such dispute (including, without limitation, determining (A) whether an issuance or sale or deemed issuance orsale of Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C)whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whetheran agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving suchdispute such investment bank shall apply such findings, determinations and the like to the terms of this Warrant and any other applicable Transaction Documents,(iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 13 to any state or federal court sittingin The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 13 and (v) nothing in this Section 13 shall limit the Holderfrom obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 13).1914. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents,at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actualand consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be nocharacterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercisesand the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to anyother obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparableharm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach orthreatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary andpermanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages andwithout posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable theHolder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). Theissuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such sharesfor any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of anytransfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.2015. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions ofthis Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involvinga claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with suchbankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.16. TRANSFER.This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.17. CERTAIN DEFINITIONS.For purposes of this Warrant, the following terms shall have the following meanings:(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.(c) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (ordeemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that couldresult in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cashsettlement rights, cash adjustment or other similar rights).(d) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with,such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of thestock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Personwhether by contract or otherwise.(e) “Approved Stock Plan” means any employee benefit plan or similar agreement which has been approved by the board of directors of the Company priorto or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,officer, director or consultants for services provided to the Company in their capacity as such.(f) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managedaccounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliatesor principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Grouptogether with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could beaggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subjectcollectively the Holder and all other Attribution Parties to the Maximum Percentage.21(g) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported byBloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price ofsuch security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time ofdetermination, or if the foregoing does not apply, the bid price of such security in the overthecounter market on the electronic bulletin board for such security asreported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the averageof the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time ofdetermination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of suchsecurity as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder areunable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All suchdeterminations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.(h) “Black Scholes Value” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price pershare equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding theannouncement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the TradingDay of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any)plus the value of the noncash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effecton the date of the Holder’s request pursuant to Section 4(c), (iii) a riskfree interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of(1) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Warrant as of the date ofconsummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of theconsummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 dayvolatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following theearliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C)the date on which the Holder first became aware of the applicable Fundamental Transaction.22(i) “Bloomberg” means Bloomberg, L.P.(j) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or requiredby law to remain closed.(k) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, whollyownedSubsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders ofthe Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization orreclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (orentities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities)after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction ofincorporation of the Company or any of its Subsidiaries.(l) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively,for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designatethe closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., NewYork time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid priceor last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the overthecounter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security byBloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC MarketsGroup Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of theforegoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutuallydetermined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shallbe resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stockcombinations, recapitalizations or other similar transactions during such period.(m) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such commonstock shall have been changed or any share capital resulting from a reclassification of such common stock.(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly,convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.23(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQX,the OTCQB (or any successors to any of the foregoing) or the Principal Market.(p) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees orconsultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause(i) do not, in the aggregate, exceed more than (x) 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and during the six (6)month period following the Subscription Date and (y) up to 1,230,000 shares of Common Stock to consultants of the Company pursuant to agreements that havebeen entered into as of the Subscription Date, and (B) the exercise price of any such options is not lowered, none of such options are amended to increase thenumber of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adverselyaffects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchaseCommon Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversionprice of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered byclause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an ApprovedStock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any suchConvertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) areotherwise materially changed in any manner that adversely affects any of the Buyers; and (iii) the shares of Common Stock issuable upon exercise of the RegisteredWarrants; provided, that the terms of the Registered Warrant are not amended, modified or changed on or after the Subscription Date (other than antidilutionadjustments pursuant to the terms thereof in effect as of the Subscription Date).(q) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or onwhich trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.24(r) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one ormore related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule102 of Regulation SX) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have itsCommon Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x)50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by allSubject Entities making or party to, or Affiliated (as defined in the Note) with any Subject Entities making or party to, such purchase, tender or exchange offer werenot outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making orparty to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of theoutstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, areorganization, recapitalization, spinoff or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in theaggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as ifany shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchaseagreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectivelythe beneficial owners (as defined in Rule 13d3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize orreclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d3 under the1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares ofCommon Stock, merger, consolidation, business combination, reorganization, recapitalization, spinoff, scheme of arrangement, reorganization, recapitalization orreclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstandingCommon Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entitiesas of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of theaggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow suchSubject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stockwithout approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more relatedtransactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of thisdefinition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to theextent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument ortransaction.(s) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d5 thereunder.(t) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.25(u) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equitysecurity is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public marketcapitalization as of the date of consummation of the Fundamental Transaction.(v) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, anyother entity or a government or any department or agency thereof.(w) “Principal Market” means the Nasdaq Capital Market.(x) “SEC” means the United States Securities and Exchange Commission or the successor thereto.(y) “Spot Price” means, as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicableExercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed anddelivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMSpromulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicableExercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant toSection 1(a) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a TradingDay and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.(z) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any FundamentalTransaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.(bb) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which theCommon Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock isscheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of tradingon such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during thehour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to alldeterminations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successorthereto) is open for trading of securities.26(cc) “VWAP” means, for any security as of any date, the dollar volumeweighted average price for such security on the Principal Market (or, if the PrincipalMarket is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded)during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set toweighted average) or, if the foregoing does not apply, the dollar volumeweighted average price of such security in the overthecounter market on the electronicbulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or,if no dollar volumeweighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowestclosing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAPcannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then suchdispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stocksplit, stock combination, recapitalization or other similar transaction during such period.[signature page follows]27IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.MY SIZE, INC.By:Name:Title:EXHIBIT AEXERCISE NOTICETO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THISWARRANT TO PURCHASE COMMON STOCKMY SIZE, INC.The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of My Size, Inc., a Delawarecorporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in theWarrant.1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holderhereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable,the Bid Price as of such time of execution of this Exercise Notice was $________.2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issuedpursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of theWarrant.3. Variable Price Securities. By checking the box in this Item 4, the holder elects to exercise the Warrant by substituting the Variable Price for the ExercisePrice pursuant to Section 2(d) of the Warrant, which Variable Price equals $ per share. £4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock inaccordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:☐ Check here if requesting delivery as a certificate to the following name and to the following address:Issue to:☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:DTC Participant:DTC Number:Account Number: Date:_____________ __, _____Name of Registered HolderBy: Name:Title:Tax ID:____________________________Facsimile:__________________________Email Address:_____________________EXHIBIT BACKNOWLEDGMENTThe Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.MY SIZE, INC.By: Name:Title:EX10.3 3 f10k2018ex103_mysizeinc.htm MY SIZE, INC. 2017 STOCK OPTION PLAN ISRAEL GRANTEES SUBPLANExhibit 10.3MY SIZE, INC.2017 STOCK OPTION PLANISRAEL GRANTEES SUBPLANNotwithstanding anything stated to the contrary in the My Size, Inc., 2017 Equity incentive Plan (the “Plan”), this SubPlan to the Plan shall apply for purposes ofall Options granted under the Plan to Grantees who are subject to Israeli taxation.1.DefinitionsAs used herein, the following terms shall have the meanings set forth below, unless the context clearly indicates to the contrary. All capitalized terms, to the extentnot defined herein, shall have the meanings set forth in the Plan.1.1“Affiliated Corporation,” for purposes of eligibility under the SubPlan shall have the meaning of the term in the Plan, provided however that in the event ofany affiliated entity, such affiliate shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.1.2“Election” – the election by the Corporation, with respect to grant of 102 Trustee Options, of either one of the following tax tracks – “Capital Gains Tax Track”or “Ordinary Income Tax Track”, as provided in and in accordance with the provisions of Section 102.1.3“Fair Market Value” solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the FairMarket Value of the Exercised Shares, then notwithstanding Section 1.11 of the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed inSection 102, if applicable.1.4“102 NonTrustee Option” – an Option granted in accordance with and pursuant to Section 102, not through a Trustee.1.5“3(i) Option” – an Option granted pursuant to Section 3(i) of the Ordinance.1.6“Ordinance” the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time,and any similar successor rules and regulations.1.7“Restricted Period” – as defined in Section 4.3 below.1.8“Section 102” – Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successorrules and regulations.1.9“Trustee” the trustee designated or replaced by the Corporation and/or applicable Affiliated Corporation for the purposes of the Plan and approved by theIsraeli tax authorities, pursuant to and in accordance with the provisions of Section 102.1.10“102 Trustee Option” – an Option granted through a Trustee in accordance with and pursuant to Section 102.2.General2.1The purpose of this SubPlan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or theexercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirementsof Israeli Law, including, if applicable, Section 102.2.2The Plan and this SubPlan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied,between the provisions of this SubPlan and the Plan, the provisions of this SubPlan shall prevail with respect to Options granted to Israeli Grantees.2.3Options may be granted under this SubPlan in one of the following tax tracks, at the Corporation’s discretion and subject to applicable restrictions orlimitations as provided in applicable Law, including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility ofGrantees to each of the following tax tracks, based on their capacity and relationship towards the Corporation:(i) 102 Trustee Options in such tax track as determined in accordance with the Election; or (ii) 102 NonTrustee Options; or (iii) 3(i) Options.For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.3.AdministrationWithout derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the full and final power and, in its discretion, without theneed for shareholders approval, unless such approval is required to comply with applicable Laws, to administer this Addendum and to take all actions related heretoand to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:3.1the determination of the specific tax track (as described in Section 2.3 above) in which the Options are to be issued.3.2the Election;3.3the appointment of the Trustee;3.4the adoption of forms of Options Agreements, to be applied with respect to Israeli Grantees, incorporating and reflecting, inter alia, relevant provisionsregarding the grant of Options in accordance with this SubPlan, and the amendment or modification from time to time of the terms thereof.24.102 Trustee Options4.1Grant in the Name of Trustee:aNotwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant tothe exercise thereof and all rights attached thereto (including bonus shares), issued to, the Trustee, and they shall be registered in the name of the Trustee, whoshall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102Trustee Options are not met, then the 102 Trustee Options may be regarded as 102 NonTrustee Option, all in accordance with the provisions of Section 102.bNotwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effectivedate of the grant of the 102 Trustee Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Boardapproving the grant of such Options, which in the case of 102 Trustee Options shall not be before the lapse of 30 days from the date upon which the Plan is firstsubmitted to the relevant Israeli Tax Authorities.4.2Exercise of 102 Trustee Options:aUnless other procedures shall be determined from time to time by the Board and notified to the Grantees, the mechanism of exercising vested 102 TrusteeOptions shall be in accordance with the provisions of the Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and methodin compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Corporation with whichthe Grantee is employed and/or engaged, if applicable, and to the Trustee.4.3Restrictions on Transfer:(a)102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be heldby the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable taxtrack, as per the Election (the “Restricted Period”).(b)Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide theCorporation and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions ofSection 102 and the Elected tax track and agrees to the provisions of the Trust Note executed between the Corporation and the Trustee, and undertakes notto release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto(including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 TrusteeOptions, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request thetransfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transferoccurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedurespromulgated thereunder shall apply to and shall be borne by such Israeli Grantee.3(c)Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement andapplicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and allrights attached thereto (including bonus shares) to the Israeli Grantee or to any third party to whom the Israeli Grantee wishes to sell them (unless thecontemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon thesale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangementregarding such payment, which is satisfactory to the Corporation and the Trustee. For the removal of doubt, it is clarified that the Trustee may release bysale or transfer to a third party only Exercised Shares (and not Options).4.4Rights as Stockholder:Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares of stock.4.5Bonus Shares:All bonus shares to be issued by the Corporation, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held bythe Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtuethereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.4.6Voting:Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall bevoted in accordance with the provisions of Section 102.4.7Conditions of Issuance:Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the tax authorities referred to therein shall, inthe event of 102 Trustee Options also need to be satisfactory to the Trustee.5.102 NonTrustee Options5.1102 NonTrustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.5.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 102 NonTrustee Options, and all rights attached thereto (including bonus shares) shall not betransferred unless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b)received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which issatisfactory to the Corporation.5.3An Israeli Grantee to whom 102 NonTrustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to thesatisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon theexercise of his/her outstanding 102 NonTrustee Options, all in accordance with the provisions of Section 102.46.3(i) Options6.13(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.6.2Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this SubPlan, the applicable Option Agreement and applicableLaw, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferredunless and until the Corporation has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) receivedconfirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to theCorporation.6.3The Corporation may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety orguarantee to the satisfaction of the Corporation, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to beissued upon the exercise of his/her outstanding 3(i) Options.7.Tax ConsequencesWithout derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant orexercise of Options, the payment for or the transfer or sale of Exercised Shares, or from any other event or act in connection therewith (including withoutlimitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) whether of the Corporation, anyAffiliated Corporation, the Trustee or the Israeli Grantee, shall be borne solely by the Israeli Grantee. The Corporation, any applicable Affiliated Corporation,and the Trustee, may each withhold (including at source), deduct and/or setoff, from any payment made to the Grantee, the amount of the taxes and/or othermandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify theCorporation, any applicable Affiliated Corporation and the Trustee, or any one thereof, and hold them harmless from any and all liability for any such tax and/orother mandatory payments or interest or penalty thereupon, including without limitation liabilities relating to the necessity to withhold, or to have withheld, anysuch tax and/or other mandatory payments from any payment made to the Israeli Grantee.Without derogating from the aforesaid, each Israeli Grantee shall provide the Corporation and/or any applicable Affiliated Corporation with any executeddocuments, certificates and/or forms that may be required from time to time by the Corporation or such Affiliated Corporation in order to determine and/orestablish the tax liability of such Israeli Grantee.Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event thathis/her 102 Trustee Option and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided inSection 102.The Corporation and or when applicable the Trustee shall not be required to release any Share Certificate to a Grantee until all required payments have beenfully made.58.Currency Exchange RatesaExcept as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this SubPlan, including without limitation theFair Market Value and the exercise price of any Option, shall be stated in United States Dollars. In the event that the exercise price is in fact to be paid in NewIsraeli Shekels, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels onthe date of payment.9.Subordination to the Ordinance9.1It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the applicable tax authorities of the Plan, this SubPlan and theTrustee, in accordance with Section 102.9.2Any provisions of the Section 102 or section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expresslyspecified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or tokeep any tax benefit, shall be deemed incorporated into this SubPlan and binding upon the Corporation, and applicable Affiliated Corporation and the IsraeliGrantee.9.3With regards to 102 Trustee Option, the provisions of the Plan and/or this SubPlan and/or the Option Agreement shall be subject to the provisions of Section102 and the permit of the Tax Assessing Officer as defined in the Ordinance, and the said provisions and permit shall be deemed an integral part of the Plan andof this SubPlan and of the Option Agreement.9.4The Options, the Plan, this SubPlan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed anintegral part of each, and which shall prevail over any term that is inconsistent therewith.6EX23.1 4 f10k2018ex231_mysizeinc.htm CONSENT OF SOMEKH CHAIKINExhibit 23.1Consent of Independent Registered Public Accounting FirmMy Size Inc.Airport City, IsraelWe consent to the incorporation by reference in the registration statements No. 333223042, No. 333222535, No. 333221199, No. 333216414 and No. 333213727 onForm S3 and registration statements No. 333222537 and No. 333227053 on Form S8 and registration statement No. 333221741 on Form S1 of My Size Inc. (the“Company”) of our report dated March 27, 2019, with respect to the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the relatedconsolidated statements of comprehensive loss, shareholders’ equity (deficit) and cash flows for each of the years in the twoyear period ended December 31, 2018,and the related notes (collectively, the “consolidated financial statements”), which report appears in the December 31, 2018 annual report on Form 10K of theCompany.As discussed in Note 2 to the consolidated financial statements, the Company elected to early adopt ASU 201807, Stock Compensation: Improvements toNonemployee ShareBased Payment Accounting as of October 1, 2018./s/Somekh ChaikinSomekh ChaikinCertified Public Accountants (Isr.)Member Firm of KPMG InternationalTel Aviv, IsraelMarch 27, 2019EX31.1 5 f10k2018ex311_mysizeinc.htm CERTIFICATIONExhibit 31.1Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Ronen Luzon certify that:1.I have reviewed this Annual Report on Form 10K of My Size, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)EX31.2 6 f10k2018ex312_mysizeinc.htm CERTIFICATIONExhibit 31.2Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanesOxley Act of 2002 and pursuant to Rule 13a14(a) and Rule 15d14 under the Securities Exchange Act of 1934I, Or Kles, certify that: 1I have reviewed this Annual Report on Form 10K of My Size, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrantand have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: March 27, 2019By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)EX32.1 7 f10k2018ex321_mysizeinc.htm CERTIFICATIONSExhibit 32.1CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the Annual Report of My Size, Inc. (the "Company") on Form 10K for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the "Report"), each of, Ronen Luzon and Or Kles, Chief Executive Officer and Chief Financial Officer of the Company,respectively, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the SarbanesOxley Act of 2002, that:(1) The Company’s Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.Date: March 27, 2019By:/s/ Ronen LuzonRonen LuzonChief Executive Officer(Principal Executive Officer)Date: March 27, 2019 By:/s/ Or KlesOr KlesChief Financial Officer(Principal Financial and Accounting Officer)

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